<PAGE>
November 30, 1999 Semiannual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
[PHOTO APPEARS HERE]
Dependable, tax-free income to help
you keep more
of what you earn.
Georgia
Louisiana
North Carolina
Tennessee
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Georgia Municipal Bond Fund
5 Nuveen Flagship Georgia Municipal Bond Fund Spotlight
6 Nuveen Flagship Louisiana Municipal Bond Fund
10 Nuveen Flagship Louisiana Municipal Bond Fund Spotlight
11 Nuveen Flagship North Carolina Municipal Bond Fund
13 Nuveen Flagship North Carolina Municipal Bond Fund Spotlight
14 Nuveen Flagship Tennessee Municipal Bond Fund
16 Nuveen Flagship Tennessee Municipal Bond Fund Spotlight
17 Portfolio of Investments
35 Statement of Net Assets
37 Statement of Operations
38 Statement of Changes in Net Assets
40 Notes to Financial Statements
45 Financial Highlights
49 Fund Information
<PAGE>
DEAR
Shareholder
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
How did you gain your financial wisdom? While some of us study finance, the
financial markets, economics or related disciplines in formal programs, most of
us end up accumulating practical knowledge through the years, from friends,
family, colleagues and media.
At Nuveen, we believe a formal financial education should start early in life. A
study sponsored by the National Council on Economic Education shows that a
whopping 66% of high school students tested on basic money skills scored an "F."
Only 3% received an "A."
Because we believe strongly in education and are committed to children's
financial literacy, we have launched a community service program, Kid$ense, in
our hometown of Chicago.
The Kid$ense curriculum, which is available for grades kindergarten through
sixth, includes textbooks, teaching materials and teacher training. The lessons
introduce children to the concept of money and how it works in society; buying,
selling and trading; working, earning, saving and investing.
Nuveen's commitment to children's financial literacy goes beyond the 250
Chicago public schools who have benefited from the Kid$ense curriculum. We also
have a commitment to family wealth management, which is a positive philosophy
that addresses the role of wealth in our lives and our world.
At Nuveen, we are dedicated to helping you and your financial adviser
develop a family wealth management strategy unique to you and your goals and
values. In your next shareholder report, look for more information about
Nuveen's dedication to Family Wealth Management, or ask your financial adviser
about this approach to investing.
The Economic Environment. I want to briefly report on the economic environment
in which your Nuveen investment performed. Read on, as we've conducted an in-
depth interview with a representative from your fund's portfolio management
team, describing how the team of investment and research professionals directed
the portfolio during the semi-annual fiscal period ended November 30, 1999.
Until fairly recently, the U.S. economy has been characterized by robust
growth, generally low interest rates and unemployment levels that remain among
the lowest in three decades.
Concerns, however, about the continued pace of the economy's expansion have
begun to test the "new paradigm," which holds that improvements in productivity
enable us to have both economic growth and low inflation at the same time. With
investors and the various markets watching -- and reacting to -- every
announcement concerning economic statistics, volatility has increased,
especially in the equity markets.
We have entered a different economic environment from that of 12 months
ago. This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the U.S. economic
slowdown that was widely expected to keep economic growth from becoming
overly robust;
. evidence of accelerating prices contributed to the reemergence of the
specter of inflation, accompanied by predictions of higher interest
rates.
"We also have a
commitment to
family wealth
management,
which is a
positive philosophy
that addresses
the role of wealth
in our lives
and our world."
SEMIANNUAL REPORT page 1
<PAGE>
"Your financial
adviser can serve
as a valuable
resource in helping
you determine if
adjustments are
needed in your
current asset
allocation plan."
In an effort to pre-empt this threat of inflation, the Federal Reserve
Board (the Fed) moved to raise interest rates by a quarter-point on three
separate occasions between June and November 1999. This brought the federal
funds rate, which represents the amount banks charge one another on overnight
loans and serves as a standard for short-term market rates, from 4.75% to 5.50%.
These increases offset the three rate cuts enacted by the Fed a year earlier.
At its November 1999 meeting, the Fed announced that it would shift to a
neutral stance following the latest interest rate increase, giving the markets
some respite during the Y2K transition. However, the Fed's indication that it
would continue to closely watch the pace of economic growth for any signs of
inflationary pressure left the door open for additional tightenings.
In January 2000, the annual rotation among members of the Fed's Open Market
Committee, the body that ultimately decides interest rate policy, will put
several members considered more "hawkish" on inflation fighting into voting
slots. This could tilt policy toward further rate increases in the new year.
Municipal bonds continued to serve investors well. At the end of November
1999, the ratio between long-term municipal yields and 30-year Treasury yields
stood at 97.14%, compared with the historical average of 89.6% over the period
1979-1999. For investors, this meant that quality long-term municipal bonds
offered yields comparable to those of long-term Treasury bonds -- even before
the tax advantages of municipals were taken into account. Of course, Treasuries
are backed by the full faith and credit of the U.S. government. Even so, on an
after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
In the coming months, we expect to see a healthy supply of new municipal
bonds, although total volume is expected to drop from the near-record levels of
1998. This is due to the dramatic decrease in the refunding of existing bonds in
the wake of higher interest rates compared to early 1999.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets may be better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, including a prospectus,
contact your financial adviser. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. As we enter a new millennium, we are committed to maintaining that
reputation and finding the best ways to serve your evolving investment needs.
Thank you for your continued confidence.
Sincerely,
/s/ Timothy Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 2000
SEMIANNUAL REPORT page 2
<PAGE>
NUVEEN FLAGSHIP GEORGIA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
- --------------------------------------------------------------------------------
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Georgia fund for the six-month
period ended November 30, 1999.
Q How did Georgia's economy and municipal market fare?
TOM Georgia's economy continues to be one of the fastest-growing in the U.S.,
expanding by roughly 50% since 1991. The state's unemployment rate was 3.6% in
November 1999, lower than the 4.1% national average. Unlike other states whose
economic growth may be constrained by labor shortages, Georgia is experiencing a
high rate of population growth.
The state's ongoing economic strength translated into strong tax
collections and municipal revenues and helped bolster the overall
creditworthiness of the Georgia municipal market. That was virtually the only
silver lining in what proved to be a very stormy environment for municipal
bonds. Continued signs of better-than-expected economic growth prompted the
Federal Reserve to raise short-term interest rates by a total of 0.75% over the
period from June through November, 1999. As bond yields rose in response, their
prices slumped and all but the shortest-maturity bond funds suffered losses.
Q How did Nuveen Flagship Georgia Municipal Bond Fund perform during the period
ended November 30, 1999?
TOM Nuveen Flagship Georgia Municipal Bond Fund generated a six-month total
return on net asset value of -4.27%, compared to the -3.49% total return posted
by the Lipper Georgia Municipal Debt Peer Group.* For the one-, five-, and ten-
year periods ending November 30, 1999, the Nuveen fund had an average annual
return of -4.14%, 7.05% and 6.34%, respectively, compared to the Lipper peer
group average annual total returns of -3.55%, 6.83%, 6.29% for the same time
periods.*
Total return equals a fund's income and capital gain distributions, if any,
plus or minus changes in net asset value. The fund's six-month taxable
equivalent total return, for investors in a 35% combined federal and state
income tax bracket, was -2.98%.**
As of November 30, 1999, the fund's SEC 30-day yield was 5.08%. For
investors in the combined 35% federal and state income tax bracket, that is
equivalent to a yield of 7.82% on a taxable investment.
Q What was your strategy amid this difficult market environment?
TOM We took advantage of the rising interest rate environment to engage in what
are known as "swaps." We sold bonds with lower interest rates, replacing them
with similar--in terms of credit quality, maturity, structure--bonds with higher
prevailing interest rates. These swaps generated two benefits for the fund.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented
investment style
. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Flagship Georgia Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 3
<PAGE>
"Call protection helps to protect
the fund's
income stream by allowing us the
luxury of hanging onto higher-yielding bonds if interest
rates fall."
* The Lipper Peer Group returns represent the average annualized total return
of the 34 funds in the Lipper Georgia Municipal Debt Category for the six-
month and one-year periods ended November 30, 1999, 25 funds for the five-
year period, and four funds for the 10-year period. The returns assume
reinvestment of dividends and do not reflect any applicable sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
First, they helped increase the fund's income-producing potential. Second, the
swaps helped enhance the fund's tax efficiency. Many of the bonds we sold were
done so at prices below their purchase price, generating tax losses that can be
used to offset capital gains. A tax loss can be used for this purpose anytime
over an eight-year period, so we consider swaps to be a valuable tool for the
fund.
NUVEEN FLAGSHIP GEORGIA MUNICIPAL BOND FUND
<TABLE>
<S> <C>
Top Five Sectors
Tax Obligation (Limited) 22%
- -------------------------------
Housing (Multifamily) 16%
- -------------------------------
U.S. Guaranteed 11%
- -------------------------------
Healthcare 10%
- -------------------------------
Water and Sewer 10%
- -------------------------------
</TABLE>
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
We identified other attractive opportunities throughout the period because
as interest rates rose, yield "spreads" widened. The spread is the difference in
yields between higher-rated and lower-rated securities. The higher yields on
lower-rated and non-rated securities made them more attractive than their
higher-rated counterparts on a risk-adjusted basis. Using the expertise of
Nuveen Research, we considered only those bonds that we felt offered adequate
compensation for the level of risk we assumed.
On some occasions, we were able to improve the fund's call protection as we
purchased newly issued bonds. Issuers generally have the right to call or redeem
their bonds after a given date prior to maturity, which they tend to do more
often when interest rates are falling and there's a financial incentive to
refinance. Call protection helps to protect the fund's income stream by allowing
us the luxury of hanging onto high-yielding bonds if interest rates fall.
Since interest rates were on the rise during the past six months, few
individual investors were seeking out call protection. As a result, call
protection was available fairly cheaply and, in many cases, at virtually no
cost. By improving the call protection of the fund, the dividend income that
shareholders receive may be more stable and less sensitive to interest rate
changes in the future.
Q What is your outlook for Nuveen Flagship Georgia Municipal Bond Fund?
TOM As long as the yield spread remains wide and the economy remains sound, we
believe that lower- and non-rated segments of the market will continue to offer
good value and help to maintain the fund's income potential. In addition, we
will continue to engage in tax swapping when we're presented with attractive
opportunities to do so.
To the extent that investors seek out value in the bond market, municipals
could benefit. As of November 30, 1999, municipal bonds traded at 97.14% of U.S.
Treasury bonds. Though it is important to note that Treasury bonds are backed by
the full faith and credit of the U.S. government, municipals are priced quite
attractively to their Treasury counterparts.
NUVEEN FLAGSHIP GEORGIA MUNICIPAL BOND FUND
<TABLE>
<S> <C>
[PIE CHART APPEARS HERE]
Bond Credit Quality
AAA/U.S. Guaranteed. 69%
AA.................. 10%
A................... 13%
BBB/NR.............. 8%
</TABLE>
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
SEMIANNUAL REPORT page 4
<PAGE>
NUVEEN FLAGSHIP GEORGIA MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.29 $10.30 $10.27 $10.26
- ----------------------------------------------------------------------------------------
Fund Symbol FGATX N/A FGACX N/A
- ----------------------------------------------------------------------------------------
CUSIP 67065P501 67065P600 67065P709 67065P808
- ----------------------------------------------------------------------------------------
Inception Date 3/86 2/97 1/94 2/97
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -4.14% -8.13% -4.95% -8.60% -4.67% -3.87%
- -------------------------------------------------------------------------------------------------
1-Year TER* -1.56% -5.66% -2.78% -6.43% -2.39% -1.17%
- -------------------------------------------------------------------------------------------------
5-Year 7.05% 6.12% 6.36% 6.21% 6.45% 7.12%
- -------------------------------------------------------------------------------------------------
10-Year 6.34% 5.89% 5.87% 5.87% 5.75% 6.38%
- -------------------------------------------------------------------------------------------------
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years.
Class C shares have a 1% CDSC for redemptions within one year which is not
reflected in the one-year total return.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 35%).
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 5.08% 4.87% 4.33% 4.53% 5.29%
- -----------------------------------------------------------------------------------
Taxable Equivalent Yield 7.82% 7.49% 6.66% 6.97% 8.14%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/./
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month Amount
<S> <C>
12/1998 $.0450
1/1999 .0450
2/1999 .0450
3/1999 .0450
4/1999 .0435
5/1999 .0435
6/1999 .0435
7/1999 .0435
8/1999 .0435
9/1999 .0435
10/1999 .0435
11/1999 .0440
</TABLE>
Portfolio Statistics
<TABLE>
<S> <C>
Total Net Assets $148.5 million
- ----------------------------------------------
Average Effective
Maturity 22.74 years
- ----------------------------------------------
Average Duration 9.21
- ----------------------------------------------
</TABLE>
/./ The Fund also paid shareholders capital gains distributions in December
1998 of $0.0409 per share.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Terms To Know
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the
duration, the less price and return variability you can expect in the fund's
price per share as interest rates change.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a
fully taxable investment to equal the stated yield on a tax-exempt investment.
SEMIANNUAL REPORT page 5
<PAGE>
NUVEEN FLAGSHIP LOUISIANA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented investment style
. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Flagship Louisiana Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
Nuveen Flagship Louisiana Municipal Bond Fund features portfolio management by
Nuveen Investment Advisory Services, a team of portfolio managers and research
analysts committed to a disciplined, research-oriented investment strategy. To
help you understand the fund's performance for the six-month period ended
November 30, 1999, we spoke with Portfolio Manager Mike Davern.
Q In an effort to cool off any brewing inflationary pressures, the Federal
Reserve Board (the Fed) raised short-term interest rates by 25 basis points, or
0.25 percent, three times in the six-month reporting period we're discussing
today. The increases occurred in June, August and November. The Fed indicated
that the rate increases were a reversal of the rate cuts it made in 1998 when
global economic and market instability threatened to derail the U.S. economy.
How do bonds typically perform in such an environment?
MIKE When interest rates are rising, it's virtually impossible for bonds to
produce the type of performance results we like to see, since bond prices move
inversely to yields. Let's look at the numbers. The 30-year U.S. Treasury bond
yield rose from 5.92% on June 1, 1999, to 6.28% on November 30, 1999 - an
increase of 36 basis points. Municipal bonds had an even tougher time. The 30-
year municipal bond started the period yielding 5.33% and ended it at 6.00%, a
much more dramatic jump of 67 basis points.
Q That's quite a discrepancy. Why have municipal bonds underperformed Treasury
bonds?
MIKE Unlike the highly liquid Treasury bond market -- which brings in buyers and
sellers from all over the world -- the municipal market's performance is highly
dependent upon local factors of supply and demand. Despite rising interest rates
and higher financing costs, the booming U.S. economy has encouraged local
municipalities to finance new projects, and thus, the supply of bonds was quite
plentiful. However, demand was not quite so robust, even though municipal bonds
are offering extremely attractive yields, especially when viewed on a taxable
equivalent basis. In fact, as of November 30, 1999, the ratio between long-term
municipal yields and 30-year Treasury yields stood at 97.14%, meaning that
municipal bonds presented an exceptionally attractive investment option relative
to Treasuries, which are backed by the full faith and credit of the U.S.
government.
SEMIANNUAL REPORT page 6
<PAGE>
Q Have Y2K concerns caused any disruptions in the market?
MIKE Actually, they haven't. If anything, it has been an extremely normal year
in terms of the timing of issuance.
For example, we recently looked at one big municipal bond deal that was set
to close on December 31, 1999, and it was oversubscribed. If there were concerns
about year-end cash flow, then the issuer would have had trouble placing the
deal. So we can't sense any problems associated with the Y2K computer bug. With
all the effort put into fixing computer systems over the last two years, it
really is not all that surprising.
Q What other national trends did you notice?
MIKE As you know, some of the bonds in our portfolios are insured. One trend
we're seeing now is in the bond insurance area: four major bond insurance
companies have stepped back a little bit, choosing not to insure some deals in
reaction to the bankruptcy of a hospital issuer in Philadelphia. This has caused
the insurers to reassess their risk exposure, certainly in the hospital market
as well as some other lower-rated credits.
Although that may sound like a negative, it actually created an opportunity
for us. So many of the bonds in our portfolio are insured with high credit
quality but relatively low yield that it's nice to get to choose from some
lower-rated credits. With the insurers stepping back, a portion of the new issue
supply is now coming to the market uninsured. This environment allows us to use
our excellent credit research staff to find bonds which have the potential for
extra yield without exposure to extra risk.
Q How did the fund perform for the period ended November 30, 1999?
MIKE Nuveen Flagship Louisiana Municipal Bond Fund generated a six-month total
return on net asset value of -5.26%, underperforming the Lipper Louisiana
Municipal Bond Fund category, which reported a total return of -4.63%. For the
one-, five- and 10-year periods, the Nuveen fund reports average annualized
total returns of -5.01%, 7.17% and 6.95%, respectively, compared to the Lipper
peer group average total returns of -4.47%, 6.37% and 6.50% for the same time
periods.*
Total return equals a fund's income plus capital gains distributions,
if any, plus or minus changes in net asset value.
Nuveen Flagship Louisiana Municipal Bond Fund's six-month taxable
equivalent total return, for investors in the 34% combined federal and state
income tax bracket, was -4.00%.** As of November 30, 1999, the fund's SEC 30-day
yield was 5.05%. For investors in the combined 34% federal and state income tax
bracket, that is equivalent to a yield of 7.65% on a taxable investment.
"This environment allows us to use our excellent credit research staff to
find bonds which have the potential for extra yield without exposure to extra
risk."
SEMIANNUAL REPORT page 7
<PAGE>
"On the plus side, the rising interest rate environment provided the
opportunity to buy bonds with higher yields and better call protection, thus
strengthening the fund's dividend-paying capability."
Q Why did the fund underperform its benchmark?
MIKE The Lipper Louisiana Municipal Bond Fund category includes bond funds with
short and intermediate maturities. In contrast, our fund invests in bonds with
long-term maturities, which is one of the ways it pursues its objective. In a
bear market for bonds, which has generally been the environment in 1999, long-
term maturities will typically underperform because these bonds are the most
sensitive to changes in interest rates. In a bull market, we would hope to
outperform, as shown by our longer-term performance numbers.
On the plus side, the rising interest rate environment provided the
opportunity to buy bonds with higher yields and better call protection, thus
strengthening the fund's dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain bonds
purchased earlier in the period fell in value. We sold some of these bonds,
taking a capital loss that, for tax purposes, can be used to offset capital
gains, or be carried forward for up to eight years to offset future gains. Tax
losses can therefore be very valuable for the fund. If the bonds purchased are
also at a discount to par value (priced less than 100), the fund still maintains
its ability to come back in price as the market recovers.
Q What other variables do you look for when considering a purchase for
the portfolio?
MIKE There are at least five different variables that we examine: price, coupon,
call, sector and rating.
Price. In a bear market, owning a bond selling at a discount to par, or
say, 80 cents on the dollar, has its advantages. As time passes, the bond heads
toward maturity when it is repaid at $1. As a result, a discount bond isn't
going to drop as much in price in a bear market because the passage of time is
tugging the bond upward in price, and thus closer to maturity. We say that a
bond priced at a deep discount has good "convexity," suggesting that the bond's
ability to go up in price is greater than its ability to go down in price. In
contrast, a bond selling at a premium above par usually has less upside. Premium
bonds typically pay higher coupons, which means that the issuer will want to
"call" the bonds, or redeem them, if interest rates later fall. As a result,
such bonds have less upside price potential.
Call. We prefer to own bonds that can't be called for at least eight to 10
years and avoid, whenever possible, bonds subject to call risk in the next year
or so. Currently, only 3.50% of the Louisiana portfolio is callable in the year
2000. That's particularly important if interest rates begin falling again. Bonds
with longer calls can generally be found in the primary or new issue market.
Coupon. As far as a bond's coupon is concerned, we're looking for bonds
that provide good tax-exempt income while keeping the fund's credit quality
high. In today's market, we're looking for bonds that pay more than 6%, which is
the equivalent of 9.09% on a taxable equivalent basis for taxpayers in the
combined 34% federal and state income tax bracket.
The higher coupons available in the market allowed us to reduce our
holdings of bonds subject to the Alternative Minimum Tax (AMT). Typically, AMT
bonds offer more income because certain investors that are subject to the AMT
effectively pay tax on income generated from AMT bonds. Another advantage of
this strategy is that AMT paper tends not to perform as well when the bond
market rallies.
SEMIANNUAL REPORT page 8
<PAGE>
Sector. We try to purchase bonds in sectors where there is limited
supply such as transportation and water/sewer. We believe that anytime you can
find something that's relatively scarce, then you're finding something that has
value.
Rating. All of our purchases are in Standard & Poor's top four credit
rating categories, or, if non-rated, judged by Nuveen Research to have
equivalent credit quality. Over the past few years, the majority of purchases
have been insured bonds. In the past six months, however, there's been some
opportunity to buy A, BAA and non-rated bonds.
For instance, we purchased Baa2 rated St. John Baptist Parish
Environmental Improvement Bonds for the USX Corporation. Nuveen research played
an instrumental role in this purchase, providing an independent assessment of
this lower-rated credit.
However, with 73% of portfolio assets invested in AAA and AA-rated
bonds, we believe that the fund is well positioned to maintain a balance of
holdings at both ends of the credit spectrum.
NUVEEN FLAGSHIP LOUISIANA MUNICIPAL BOND FUND
Top Five Sectors
<TABLE>
<CAPTION>
<S> <C>
Healthcare 19%
- -----------------------------
Tax Obligation (Limited) 19%
- -----------------------------
Housing (Single Family) 12%
- -----------------------------
Tax Obligation (General) 11%
- -----------------------------
U.S. Guaranteed 10%
- -----------------------------
</TABLE>
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
NUVEEN FLAGSHIP LOUISIANA MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
AAA/U.S. Guaranteed..64%
AA................... 7%
A....................15%
BBB/NR...............14%
</TABLE>
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
Q What is your outlook for Nuveen Flagship Louisiana Municipal Bond Fund?
MIKE We will continue to focus on maintaining a stable dividend that is exempt
from federal and state income taxes. Using Nuveen research, we will continue to
look for attractively priced bonds offering higher yields. In a high tax state
such as Louisiana, we believe that municipal bonds represent a very attractive
option for investors searching for yield.
* The Lipper Peer Group returns represent the average annualized total return
of the 11 funds in the Lipper Louisiana Municipal Debt Category for the six-
month and one-year periods ended November 30, 1999, and eight and four funds
for the five- and 10-year periods, respectively. The returns assume
reinvestment of dividends and do not reflect any applicable sales charges.
* * Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
SEMIANNUAL REPORT page 9
<PAGE>
NUVEEN FLAGSHIP LOUISIANA MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.50 $10.50 $10.49 $10.51
- -----------------------------------------------------------------------
Fund Symbol FTLAX N/A FTLCX N/A
- -----------------------------------------------------------------------
CUSIP 67065P881 67065P873 67065P865 67065P857
- -----------------------------------------------------------------------
Inception Date 9/89 2/97 2/94 2/97
- -----------------------------------------------------------------------
</TABLE>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -5.01% -8.99% -5.64% -9.25% -5.53% -4.73%
- -------------------------------------------------------------------------------
1-Year TER* -2.49% -6.58% -3.51% -7.11% -3.28% -2.10%
- -------------------------------------------------------------------------------
5-Year 7.17% 6.24% 6.47% 6.32% 6.58% 7.31%
- -------------------------------------------------------------------------------
10-Year 6.95% 6.49% 6.47% 6.47% 6.37% 7.03%
- -------------------------------------------------------------------------------
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years.
Class C shares have a 1% CDSC for redemptions within one year which is not
reflected in the one-year total return.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 34%).
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 5.05% 4.83% 4.29% 4.49% 5.25%
- --------------------------------------------------------------------------------
Taxable Equivalent Yield 7.65% 7.32% 6.50% 6.80% 7.95%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)[SQUARE]
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month Amount
<S> <C>
12/1998 $.0470
1/1999 .0470
2/1999 .0470
3/1999 .0470
4/1999 .0460
5/1999 .0460
6/1999 .0460
7/1999 .0460
8/1999 .0460
9/1999 .0460
10/1999 .0460
11/1999 .0460
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Total Net Assets $129.3 million
- ----------------------------------
Average Effective
Maturity 21.77 years
- ----------------------------------
Average Duration 9.86
- ----------------------------------
</TABLE>
[SQUARE] The Fund also paid shareholders capital gains and net ordinary income
distributions in December 1998 of $0.0920 per share.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Terms To Know
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a
fully taxable investment to equal the stated yield on a tax-exempt investment.
SEMIANNUAL REPORT page 10
<PAGE>
NUVEEN FLAGSHIP NORTH CAROLINA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the North Carolina fund for the six-
month period ended November 30, 1999.
Q How did North Carolina's economy and municipal market fare?
TOM The North Carolina economy continues to do well, experiencing its eighth
consecutive year of expansion in 1999. The state has one of the nation's lowest
unemployment rates at 3.2% as of November 30, 1999. Growth in the high-tech,
financial services, real estate, service and agricultural sectors have offset
contraction in the manufacturing, textile and furniture sectors.
The state's ongoing economic strength translated into strong tax
collections and municipal revenues and helped bolster the overall
creditworthiness of the North Carolina municipal market. That was virtually the
only silver lining in what proved to be a very stormy environment for municipal
bonds. Continued signs of better-than-expected economic growth prompted the
Federal Reserve to raise short-term interest rates by a total of 0.75% over the
period from June through November, 1999. As bond yields rose in response, their
prices slumped and all but the shortest-maturity bond funds suffered losses.
Q How did Nuveen Flagship North Carolina Municipal Bond Fund perform during the
period ended November 30, 1999?
TOM Nuveen Flagship North Carolina Municipal Bond Fund generated a six-month
total return on net asset value of -4.70%, compared to the -3.57% total return
posted by the Lipper North Carolina Municipal Debt Peer Group.* For the one-,
five-, and ten-year periods ending November 30, 1999, the Nuveen fund had an
average annual return of -4.60%, 6.01% and 5.89%, respectively, compared to the
Lipper peer group average annual total returns of -3.50%, 6.65%, 5.89% for the
same time periods.*
Total return equals a fund's income and capital gain distributions, if any,
plus or minus changes in net asset value. The fund's six-month taxable
equivalent total return, for investors in a 36.5% combined federal and state
income tax bracket, was -3.33%.**
As of November 30, 1999, the fund's SEC 30-day yield was 4.90%. For
investors in the combined 36.5% federal and state income tax bracket, that is
equivalent to a yield of 7.72% on a taxable investment.
Q What was your strategy amid this difficult market environment?
TOM We took advantage of the rising interest rate environment to engage in what
are known as "swaps." We sold bonds with lower interest rates, replacing them
with similar--in terms of credit quality, maturity and structure--bonds with
higher prevailing interest rates. These swaps generated two benefits for the
fund.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/--a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented investment style
. The unmatched presence of trading leverage of a market leader. This
disciplined, research-oriented approach has paid off for investors, and is a
key investment strategy for Nuveen Flagship North Carolina Municipal Bond
Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 11
<PAGE>
"Call protection helps to protect the fund's income stream by allowing us the
luxury of hanging onto higher-yielding bonds if interest rates fall."
* The Lipper Peer Group returns represent the average annualized total return
of the 40 funds in the Lipper North Carolina Municipal Debt Category for the
six-month and one-year periods ended November 30, 1999, 31 funds for the
five-year period, and four funds for the 10-year period. The returns assume
reinvestment of dividends and do not reflect any applicable sales charges.
* * Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
First, they helped increase the fund's income-producing potential. Second, the
swaps helped enhance the fund's tax efficiency. Many of the bonds we sold were
done so at prices below their purchase price, generating tax losses that can be
used to offset capital gains. A tax loss can be used for this purpose anytime
over an eight-year period, so we consider swaps to be a valuable tool for the
fund.
We identified other attractive opportunities throughout the period because
as interest rates rose, yield "spreads" widened. The spread is the difference in
yields between higher-rated and lower-rated securities. The higher yields on
lower-rated and non-rated securities made them more attractive than their
higher-rated counterparts on a risk-adjusted basis. Using the expertise of
Nuveen Research, we considered only those bonds that we felt offered adequate
compensation for the level of risk we assumed.
On some occasions, we were able to improve the fund's call protection as we
purchased newly issued bonds. Issuers generally have the right to call or redeem
their bonds after a given date prior to maturity, which they tend to do more
often when interest rates are falling and there's a financial incentive to
refinance. Call protection helps to protect the fund's income stream by allowing
us the luxury of hanging onto higher-yielding bonds if interest rates fall.
Since interest rates were on the rise during the past six months, few
individual investors were seeking out call protection. As a result, call
protection was available fairly cheaply and, in many cases, at virtually no
cost. By improving the call protection of the fund, the dividend income that
shareholders receive may be more stable and less sensitive to interest rate
changes in the future.
NUVEEN FLAGSHIP NORTH CAROLINA MUNICIPAL BOND FUND
Top Five Sectors
<TABLE>
<CAPTION>
<S> <C>
Housing (Single Family) 21%
- ----------------------------
Utilities 19%
- ----------------------------
Healthcare 17%
- ----------------------------
Tax Obligation (Limited) 13%
- ----------------------------
Basic Materials 9%
- ----------------------------
</TABLE>
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
Q What is your outlook for Nuveen Flagship North Carolina Municipal Bond Fund?
TOM As long as the yield spread remains wide and the economy remains sound, we
believe that the lower- and non-rated segments of the market will continue to
offer good value and help to maintain the fund's income potential. In addition,
we will continue to engage in tax swapping when we're presented with attractive
opportunities to do so.
To the extent that investors seek out value in the bond market, municipals
could benefit. As of November 30, 1999, municipal bonds traded at 97.14% of U.S.
Treasury bonds. Though it is important to note that Treasury bonds are backed by
the full faith and credit of the U.S. government, municipals are priced quite
attractively to their Treasury counterparts.
NUVEEN FLAGSHIP NORTH CAROLINA MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
AAA/U.S. Guaranteed..29%
AA...................39%
A....................17%
BBB/NR...............15%
</TABLE>
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
SEMIANNUAL REPORT page 12
<PAGE>
NUVEEN FLAGSHIP NORTH CAROLINA MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 9.65 $ 9.66 $ 9.64 $ 9.65
- -----------------------------------------------------------------------
Fund Symbol FLNCX N/A FCNCX N/A
- -----------------------------------------------------------------------
CUSIP 67065P840 67065P832 67065P824 67065P816
- -----------------------------------------------------------------------
Inception Date 3/86 2/97 10/93 2/97
- -----------------------------------------------------------------------
</TABLE>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -4.60% -8.61% -5.25% -8.86% -5.07% -4.43%
- ------------------------------------------------------------------------------------
1-Year TER* -1.86% -5.98% -2.97% -6.57% -2.66% -1.59%
- ------------------------------------------------------------------------------------
5-Year 6.01% 5.11% 5.33% 5.17% 5.42% 6.11%
- ------------------------------------------------------------------------------------
Since Inception 5.89% 5.43% 5.42% 5.42% 5.29% 5.94%
- ------------------------------------------------------------------------------------
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years.
Class C shares have a 1% CDSC for redemptions within one year which is not
reflected in the one-year total return.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 36.5%).
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.90% 4.70% 4.15% 4.35% 5.10%
- ------------------------------------------------------------------------------
Taxable Equivalent Yield 7.72% 7.40% 6.54% 6.85% 8.03%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month Amount
<S> <C>
12/1998 $.0430
1/1999 $.0415
2/1999 $.0415
3/1999 $.0415
4/1999 $.0415
5/1999 $.0415
6/1999 $.0415
7/1999 $.0415
8/1999 $.0405
9/1999 $.0405
10/1999 $.0405
11/1999 $.0405
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Total Net Assets $196.6 million
- ----------------------------------
Average Effective
Maturity 22.07 years
- ----------------------------------
Average Duration 9.84
- ----------------------------------
</TABLE>
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Terms To Know
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a
fully taxable investment to equal the stated yield on a tax-exempt investment.
SEMIANNUAL REPORT page 13
<PAGE>
NUVEEN FLAGSHIP TENNESSEE MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/--a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented investment style
. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Flagship Tennessee Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Tennessee fund for the six-month
period ended November 30, 1999.
Q How did Tennessee's economy and municipal market fare?
TOM The state's economy is on firm ground, evidenced by an unemployment rate
that is below the national average. As of November 30, 1999, Tennessee's
unemployment figure stood at 3.6%, compared to 4.1% for the nation. Growth in
manufacturing jobs, especially in the automobile industry, also has
significantly outpaced the nation as a whole, although cutbacks in the apparel
and textile industries have constrained overall economic growth in the state
somewhat compared to the rest of the country.
The state's ongoing economic strength translated into strong tax
collections and municipal revenues and helped bolster the overall
creditworthiness of the Tennessee municipal market. That was virtually the only
silver lining in what proved to be a very stormy environment for municipal
bonds. Continued signs of better-than-expected economic growth prompted the
Federal Reserve to raise short-term interest rates by a total of 0.75% over the
period from June through November 1999. As bond yields rose in response, their
prices slumped and all but the shortest-maturity bond funds suffered losses.
Q How did Nuveen Flagship Tennessee Municipal Bond Fund perform during the
period ended November 30, 1999?
TOM Nuveen Flagship Tennessee Municipal Bond Fund generated a total return on
net asset value of -4.06%, compared to the -3.19% total return posted by the
Lipper Tennessee Municipal Debt Peer Group.* For the one-, five-, and ten-year
periods ending November 30, 1999, the Nuveen fund had an average annual return
of -4.11%, 6.30% and 6.11%, respectively, compared to the Lipper peer group
average annual total returns of -2.85%, 6.69%, 6.05% for the same time periods.*
Total return equals a fund's income and capital gain distributions, if any,
plus or minus changes in net asset value.
The fund's taxable equivalent total return, for investors in a 35% combined
federal and state income tax bracket, was -2.75%.** As of November 30, 1999, the
fund's SEC 30-day yield was 4.94%. For investors in the combined 35% federal and
state income tax bracket, that is equivalent to a yield of 7.60% on a taxable
investment.
Q What was your strategy amid this difficult market environment?
TOM We took advantage of the rising interest rate environment to engage in
what are known as "swaps." We sold bonds with lower interest rates, replacing
them with similar--in terms of credit quality, maturity and structure--bonds
with higher prevailing interest rates. These swaps generated two benefits for
the fund.
SEMIANNUAL REPORT page 14
<PAGE>
"Call protection helps to protect
the fund's
income stream by allowing us the
luxury of hanging onto higher-yielding bonds if interest
rates fall."
* The Lipper Peer Group returns represent the average annualized total return
of the 18 funds in the Lipper Tennessee Municipal Debt Category for the six-
month and one-year periods ended November 30, 1999, 13 funds for the five-
year period, and 2 funds for the 10-year period. The returns assume
reinvestment of dividends and do not reflect any applicable sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
First, they helped increase the fund's income-producing potential. Second, the
swaps helped enhance the fund's tax efficiency. Many of the bonds we sold were
done so at prices below their purchase price, generating tax losses that can be
used to offset capital gains. A tax loss can be used for this purpose anytime
over an eight-year period, so we consider swaps to be a valuable tool for the
fund.
We identified other attractive opportunities throughout the period
because as interest rates rose, yield "spreads" widened. The spread is the
difference in yields between higher-rated and lower-rated securities. The higher
yields on lower-rated and non-rated securities made them more attractive than
their higher-rated counterparts on a risk-adjusted basis. Using the expertise of
Nuveen Research, we considered only those bonds that we felt offered adequate
compensation for the level of risk we assumed.
For example, we purchased bonds issued by the Chattanooga Housing
(Tennessee Housing) Authority, AAA-rated by Standard & Poor's, paying a 6.375%
coupon due 2039. At the time of purchase the yield represented about 58 basis
points over the yields offered by higher investment grade bonds.
On some occasions, we were able to improve the fund's call protection as we
purchased newly issued bonds. Issuers generally have the right to call or redeem
their bonds after a given date prior to maturity, which they tend to do more
often when interest rates are falling and there's a financial incentive to
refinance. Call protection helps to protect the fund's income stream by allowing
us the luxury of hanging onto higher-yielding bonds if interest rates fall.
Since interest rates were on the rise during the past six months, few
individual investors were seeking out call protection. As a result, call
protection was available fairly cheaply and, in many cases, at virtually no
cost. By improving the call protection of the fund, the dividend income that
shareholders receive may be more stable and less sensitive to interest rate
changes in the future.
Q What is your outlook for Nuveen Flagship Tennessee Municipal Bond Fund?
TOM As long as the yield spread remains wide and the economy remains sound, we
believe that the lower- and non-rated segments of the market will continue to
offer good value and help to maintain the fund's income potential. In addition,
we will continue to engage in tax swapping when we're presented with attractive
opportunities to do so.
To the extent that investors seek out value in the bond market, municipals
could benefit. As of November 30, 1999, municipal bonds traded at 97.14% of U.S.
Treasury bonds. Though it is important to note that Treasury bonds are backed by
the full faith and credit of the U.S. government, municipals are priced quite
attractively to their Treasury counterparts.
NUVEEN FLAGSHIP TENNESSEE MUNICIPAL BOND FUND
Top Five Sectors
Healthcare 18%
- -----------------------------
U.S. Guaranteed 17%
- -----------------------------
Housing (Single Family) 13%
- -----------------------------
Tax Obligation (Limited) 10%
- -----------------------------
Basic Materials 8%
- -----------------------------
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
NUVEEN FLAGSHIP TENNESSEE MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE] AAA/U.S. Guaranteed..47%
AA...................27%
A....................12%
BBB/NR...............14%
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
SEMIANNUAL REPORT page 15
<PAGE>
Terms To Know
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
NUVEEN FLAGSHIP TENNESSEE MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares D Shares
<S> <C> <C> <C> <C>
NAV $10.57 $10.58 $10.57 $10.56
- ------------------------------------------------------------------------------------------
Fund Symbol FTNTX FTMBX FTNCX N/A
- ------------------------------------------------------------------------------------------
CUSIP 67065P758 67065P741 67065P733 67065P725
- ------------------------------------------------------------------------------------------
Inception Date 11/87 2/97 10/93 2/97
- ------------------------------------------------------------------------------------------
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
- ----------------------------------------------------------------------------------------------
1-Year -4.11% -8.16% -4.83% -8.48% -4.67% -3.93%
- ----------------------------------------------------------------------------------------------
1-Year TER* -1.51% -5.66% -2.63% -6.28% -2.39% -1.22%
- ----------------------------------------------------------------------------------------------
5-Year 6.30% 5.39% 5.62% 5.46% 5.72% 6.39%
- ----------------------------------------------------------------------------------------------
10-Year 6.11% 5.66% 5.63% 5.63% 5.52% 6.16%
- ----------------------------------------------------------------------------------------------
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years. Class C shares
have a 1% CDSC for redemptions within one year which is not reflected in the
one-year total return.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 35%).
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.94% 4.73% 4.18% 4.39% 5.14%
- --------------------------------------------------------------------------
Taxable Equivalent Yield 7.60% 7.28% 6.43% 6.75% 7.91%
</TABLE>
[BAR CHART APPEARS HERE]
Monthly Tax-Free Dividends (Class A Shares)
<TABLE>
<CAPTION>
Month Amount
<S> <C>
12/1998 $.0460
1/1999 .0460
2/1999 .0460
3/1999 .0460
4/1999 .0455
5/1999 .0455
6/1999 .0455
7/1999 .0455
8/1999 .0455
9/1999 .0455
10/1999 .0455
11/1999 .0455
</TABLE>
Portfolio Statistics
Total Net Assets $297.9 million
- ------------------------------------------
Average Effective
Maturity 19.66 years
- ------------------------------------------
Average Duration 8.96
- ------------------------------------------
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
SEMIANNUAL REPORT page 16
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Georgia Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 2.6%
$ 1,500,000 Brunswick and Glynn County Development Authority, Revenue 3/08 at 102 Baa2 $ 1,305,420
Refunding Bonds, Series 1998 (Georgia Pacific Corporation
Project), 5.550%, 3/01/26 (Alternative Minimum Tax)
1,000,000 Savannah Economic Development Authority, Pollution Control No Opt. Call A1 1,029,460
Revenue Refunding Bonds (Union Camp Corporation Project),
Series 1995, 6.150%, 3/01/17
500,000 Wayne County Development Authority, Solid Waste Disposal Revenue 7/00 at 102 Baa2 515,380
Bonds (ITT Rayonier, Inc. Project), Series 1990, 8.000%, 7/01/15
(Alternative Minimum Tax)
1,000,000 Wayne County (Georgia) Development Authority, Pollution Control 5/03 at 102 Baa 1,006,710
Revenue Refunding Bonds (ITT Rayonier Inc. Project), Series 1993,
6.100%, 11/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals - 0.3%
500,000 White County Development Authority, Industrial Development 6/02 at 102 BBB+ 510,635
Revenue Bonds (Springs Industries, Inc.), 6.850%, 6/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 3.5%
2,500,000 Albany Dougherty Payroll Development Authority (Georgia), Solid No Opt. Call AA 2,180,825
Waste Disposal Revenue Bonds (The Procter and Gamble Paper
Products Company Project), 1999 Series, 5.200%, 5/15/28
(Alternative Minimum Tax)
1,000,000 Development Auhority of Cartersville (Georgia), Water and 5/02 at 102 A+ 1,057,700
Wastewater Facilities Revenue Bonds, Series 1992
(Anheuser-Busch Project), 6.750%, 2/01/12 (Alternative
Minimum Tax)
2,000,000 Development Authority of Cartersville (Georgia), Sewage 5/07 at 101 A+ 1,973,220
Facilities Refunding Revenue Bonds (Anheuser-Busch Project),
Series 1997, 6.125%, 5/01/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 5.8%
1,000,000 Private Colleges and Universities Authority (Georgia), Revenue No Opt. Call AAA 1,097,500
Bonds (Mercer University Project), Series 1991, 6.500%, 11/01/15
8,000,000 Private Colleges and Universities Authority (Georgia), Student 6/09 at 102 A 7,020,320
Housing Revenue Bonds (Mercer Housing Corporation Project),
Tax-Exempt Series 1999A, 5.375%, 6/01/31
500,000 Private Colleges and Universities Authority (Georgia), Revenue 6/04 at 102 AAA 529,745
Refunding Bonds (Spelman College Project), Series 1994,
6.200%, 6/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 9.6%
5,000,000 Baldwin County Hospital Authority (Georgia), Revenue Bonds 12/08 at 102 BBB 4,121,800
(Oconee Regional Medical Center), Series 1998, 5.375%, 12/01/28
500,000 Hospital Authority of Cherokee County, Georgia, Revenue 12/00 at 102 AAA 522,645
Certificates, Tax Exempt Series 1990, 7.250%, 12/01/15
1,000,000 Coffee County Hospital Authority (Georgia), Revenue Anticipation 12/06 at 102 N/R 983,650
Certificates (Coffee Regional Medical Center, Inc. Project),
Series 1997A, 6.750%, 12/01/16
Development Authority of the City of Dalton (Georgia), Revenue
Certificates (Hamilton Health Care System), Series 1996:
2,000,000 5.500%, 8/15/26 No Opt. Call AAA 1,891,620
2,000,000 5.250%, 8/15/26 2/07 at 102 AAA 1,785,540
1,000,000 Development Authority of the City of Dalton (Georgia), Revenue 2/08 at 101 Aaa 853,740
Certificates (HLTC, Inc. Project), Series 1998, 5.000%, 8/15/28
1,000,000 The Hospital Authority of Hall County and the City of 10/05 at 102 AAA 998,130
Gainesville, Revenue Anticipation Certificates (Northeast
Georgia Healthcare Project), Series 1995, 6.000%, 10/01/20
1,000,000 Hospital Authority of Gwinnett County, Georgia, Revenue 9/07 at 101 AAA 890,750
Anticipation Certificates (Gwinnett Hospital System, Inc.
Project), Series 1997A, 5.250%, 9/01/27
</TABLE>
17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Georgia Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 2,250,000 Hospital Authority of the City of Royston (Georgia), Revenue 7/09 at 102 N/R $ 2,135,498
Anticipation Certificates (Ty Cobb Healthcare System, Inc.
Project), Series 1999, 6.500%, 7/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 15.6%
The Housing Authority of the City of Atlanta, Georgia, Multifamily
Housing Revenue Bonds (The Village at Castleberry Hill Project), GNMA
Collateralized Series 1999:
2,000,000 5.300%, 2/20/29 (Alternative Minimum Tax) 2/09 at 102 AAA 1,770,460
5,000,000 5.400%, 2/20/39 (Alternative Minimum Tax) 2/09 at 102 AAA 4,413,150
1,840,000 Housing Authority of the City of Augusta, Georgia, Mortgage 5/05 at 102 Aa 1,898,770
Revenue Refunding Bonds, Series 1995A (FHA-Insured Mortgage Loan -
River Glen Apartments Section 8 Assisted Project), 6.500%, 5/01/27
1,000,000 Housing Authority of the County of DeKalb, Georgia, Multifamily 1/05 at 102 AAA 1,057,840
Housing Revenue Bonds (The Lakes at Indian Creek Apartments
Project), Series 1994, 7.150%, 1/01/25 (Alternative Minimum Tax)
3,470,000 Housing Authority of the County of DeKalb, Georgia, Multifamily 1/06 at 102 A 3,535,167
Housing Revenue Bonds (Regency Woods I and II Project), Senior
Series 1996A, 6.500%, 1/01/26
4,000,000 Housing Authority of Fulton County, Georgia, Multifamily Housing 7/06 at 102 AAA 4,334,920
Revenue Bonds (Concorde Place Apartments Project), Series 1996A,
6.375%, 1/01/27 (Alternative Minimum Tax)
4,715,000 Housing Authority of the City of Lawrenceville, Georgia, 6/07 at 102 AAA 4,847,303
Multifamily Housing Revenue Bonds (Knollwood Park Apartments Project),
Series 1997, 6.250%, 12/01/29 (Alternative Minimum Tax)
1,295,000 Housing Authority of the City of Macon, Georgia, Multifamily 10/04 at 102 Aaa 1,333,733
Mortgage Revenue Refunding Bonds, Series 1994A (FHA-Insured Mortgage
Loan - The Vistas), 6.450%, 4/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.6%
Housing Authority of Fulton County, Georgia, Single Family Mortgage Revenue
Bonds (GNMA Mortgage-Backed Securities Program), Series 1995A:
310,000 6.550%, 3/01/18 (Alternative Minimum Tax) 3/05 at 102 AAA 317,676
105,000 6.600%, 3/01/28 (Alternative Minimum Tax) 3/05 at 102 AAA 108,773
Housing Authority of Fulton County, Georgia, Single Family Mortgage Revenue
Refunding Bonds (GNMA Mortgage-Backed Securities Program), Series 1996A:
415,000 6.125%, 9/01/18 (Alternative Minimum Tax) 9/06 at 102 AAA 416,208
655,000 6.200%, 9/01/27 (Alternative Minimum Tax) 9/06 at 102 AAA 654,404
1,215,000 Georgia Housing and Finance Authority, Single Family Mortgage 6/04 at 102 AAA 1,244,682
Bonds, 1994 Series A (FHA-Insured or VA Guaranteed Mortgage Loans),
6.500%, 12/01/17 (Alternative Minimum Tax)
1,000,000 Georgia Housing and Finance Authority, Single Family Mortgage 3/05 at 102 AAA 1,021,950
Bonds, 1995 Series A Subseries A-2, 6.400%, 12/01/15 (Alternative
Minimum Tax)
2,500,000 Georgia Housing and Finance Authority, Single Family Mortgage 6/05 at 102 AAA 2,565,400
Bonds, 1995 Series B Subseries B-2, 6.550%, 12/01/27
(Alternative Minimum Tax)
3,355,000 Georgia Housing and Finance Authority, Single Family Mortgage 6/06 at 102 AAA 3,416,430
Bonds, 1996 Series A Subseries A-2, 6.450%, 12/01/27
(Alternative Minimum Tax)
130,000 Georgia Residential Finance Authority, Home Ownership Mortgage 12/99 at 103 AA+ 133,173
Bonds, 1989 Series D (Conventional Mortgage Loans), 7.800%,
6/01/21 (Alternative Minimum Tax)
205,000 Georgia Residential Finance Authority, Home Ownership Mortgage 12/00 at 103 AA+ 210,695
Bonds, 1990 Series A (FHA-Insured or VA Guaranteed Mortgage
Loans), 7.750%, 6/01/18 (Alternative Minimum Tax)
1,115,000 Georgia Residential Finance Authority, Home Ownership Mortgage 12/01 at 103 AA+ 1,151,182
Bonds, 1991 Series A (FHA-Insured or VA Guaranteed Mortgage
Loans), 7.250%, 12/01/21 (Alternative Minimum Tax)
55,000 Georgia Residential Finance Authority, Single Family Mortgage 12/99 at 102 AA+ 56,187
Bonds, 1988 Series B (FHA-Insured or VA Guaranteed Mortgage
Loans), 8.000%, 12/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 3.9%
3,810,000 Peach County School District (Georgia), General Obligation School 2/05 at 102 AAA 4,162,920
Bonds, Series 1994, 6.400%, 2/01/19
1,500,000 Washington County School District (Georgia), General Obligation 1/05 at 102 AAA 1,668,600
School Bonds, Series 1994, 6.875%, 1/01/14
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - 22.2%
$ 570,000 Development Authority of Burke County (Georgia) Industrial 2/01 at 102 A $ 594,852
Development Revenue Bonds (Georgia Safe Corporation Project),
Series 1991, 7.500%, 2/01/11 (Alternative Minimum Tax)
1,150,000 Burke County Economic Development Authority, Georgia, Revenue 12/02 at 102 A 1,225,866
Bonds (Ritz Intrument Transformers, Inc. Project), Series
1991A, 7.250%, 12/01/11 (Alternative Minimum Tax)
1,750,000 Association County Commissioners of Georgia, Leasing Program 12/04 at 102 AAA 1,906,940
(Butts County, Georgia, Public Purpose Project), Series 1994,
Certificates of Participation, 6.750%, 12/01/14
1,000,000 The Hospital Authority of Clarke County, Georgia, Hospital Revenue 1/07 at 100 AAA 857,980
Certificates (Athens Regional Medical Center Project), Series 1996,
5.000%, 1/01/27
6,000,000 The Hospital Authority of Clarke County, Georgia, Hospital Revenue 1/09 at 101 AAA 5,327,760
Certificates (Athens Regional Medical Center Project), Series 1999,
5.250%, 1/01/29
1,215,000 Clayton County Solid Waste Management Authority (Georgia), Revenue 2/02 at 102 AA 1,273,113
Bonds, Series 1992A, 6.500%, 2/01/12
3,000,000 Cobb-Marietta Coliseum and Exhibit Hall Authority (Georgia), 10/19 at 100 AAA 2,918,790
Revenue Refunding Bonds, Series 1993, 5.625%, 10/01/26
1,000,000 Downtown Smyrna Development Authority (Georgia), Revenue Bonds, 2/05 at 102 AAA 1,101,710
Series 1994, 6.600%, 2/01/17
2,765,000 Metropolitan Atlanta Rapid Transit Authority (Georgia), Sales Tax No Opt. Call AA- 2,947,601
Revenue Bonds, Refunding Series N, 6.250%, 7/01/18
500,000 Metropolitan Atlanta Rapid Transit Authority (Georgia), Sales Tax No Opt. Call AAA 527,115
Revenue Bonds, Refunding Series P, 6.250%, 7/01/20
125,000 Puerto Rico Infrastructure Finance Authority, Special Tax Revenue 1/00 at 101 BBB+ 126,594
Bonds, Series 1988A, 7.750%, 7/01/08
7,000,000 Rockdale County Water and Sewerage Authority (Georgia), Revenue 1/10 at 101 AAA 6,428,870
Bonds, Series 1999A, 5.375%, 7/01/29
7,055,000 Upper Oconee Basin Water Authority (Georgia), Revenue Bonds, 7/08 at 102 AAA 6,367,279
Series 1997, 5.250%, 7/01/27
1,250,000 Hospital Authority of Ware County (Georgia), Revenue Anticipation 3/02 at 102 AAA 1,309,950
Certificates, Series 1992A (Satilla Park Hospital), 6.625%, 3/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 0.7%
1,000,000 City of Atlanta, Georgia, Airport Facilities Revenue Refunding 1/07 at 101 AAA 1,006,170
Bonds, Series 1996, 5.250%, 1/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 11.3%
Chatham County Hospital Authority, Hospital Revenue Bonds (Memorial Medical
Center, Inc., Savannah, Georgia), Series 1990A:
100,000 7.000%, 1/01/10 (Pre-refunded to 1/01/01) 1/01 at 102 AAA 104,855
1,130,000 7.000%, 1/01/21 (Pre-refunded to 1/01/01) 1/01 at 102 AAA 1,184,862
505,000 Cherokee County Water and Sewerage Authority (Georgia), Revenue No Opt. Call AAA 654,455
Bonds, Series 1985, 9.750%, 8/01/09
500,000 Hospital Authority of Colquitt County, Georgia, Hospital Revenue 3/02 at 102 AAA 533,785
Certificates, Series 1992, 6.700%, 3/01/12 (Pre-refunded to 3/01/02)
1,000,000 City of Conyers (Georgia), Water and Sewerage Revenue Bonds, 7/04 at 102 AAA 1,083,030
Series 1994A, 6.600%, 7/01/15
800,000 Downtown Marietta Development Authority (Georgia), Revenue Bonds, 1/02 at 102 Aaa 850,032
Series 1992, 6.600%, 1/01/19 (Pre-refunded to 1/01/02)
Fulco Hospital Authority, Revenue Anticipation Certificates (Georgia
Baptist Health Care System Project), Series 1992A:
3,000,000 6.250%, 9/01/13 (Pre-refunded to 9/01/02) 9/02 at 102 Baa1*** 3,182,910
2,600,000 6.375%, 9/01/22 (Pre-refunded to 9/01/02) 9/02 at 102 Baa1*** 2,766,842
2,250,000 Fulco Hospital Authority, Refunding Revenue Anticipation 9/02 at 102 Baa1*** 2,394,383
Certificates (Georgia Baptist Health Care System Project),
Series 1992B, 6.375%, 9/01/22 (Pre-refunded to 9/01/02)
500,000 City of Gainesville, Georgia, Water and Sewer Revenue Bonds, 11/00 at 102 AAA 524,850
Series 1990B, 7.200%, 11/15/10 (Pre-refunded to 11/15/00)
1,650,000 Metropolitan Atlanta Rapid Transit Authority (Georgia), Sales Tax 7/04 at 102 AAA 1,831,500
Revenue Bonds, Second Indenture Series, Series 1994A, 6.900%,
7/01/20 (Pre-refunded to 7/01/04)
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Georgia Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,015,000 Peach County, School District (Georgia), General Obligation 2/05 at 102 AAA $ 1,104,411
School Bonds, Series 1994, 6.300%, 2/01/14 (Pre-refunded to 2/01/05)
500,000 Hospital Authority of Ware County (Georgia), Revenue Anticipation 3/01 at 102 AAA 513,860
Certificates, Series 1991, 7.125%, 3/01/15 (Pre-refunded to 3/01/01)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.8%
1,800,000 Development Authority of Appling County (Georgia), Pollution 1/04 at 101 AAA 1,945,926
Control Revenue Bonds (Oglethorpe Power Corporation - Hatch
Project), Series 1994, 7.150%, 1/01/21
1,500,000 Municipal Electric Authority of Georgia, General Power 1/15 at 100 A 1,577,265
Revenue Bonds, 1992B Series, 6.375%, 1/01/16
Municipal Electric Authority of Georgia, Power Revenue Bonds,
Series Z:
1,000,000 5.500%, 1/01/12 1/10 at 100 AAA 1,016,290
1,000,000 5.500%, 1/01/20 No Opt. Call AAA 980,190
Development Authority of Monroe County (Georgia), Pollution Control Revenue
Bonds (Oglethorpe Power Corporation - Scherer Project), Series 1992A:
500,000 6.750%, 1/01/10 No Opt. Call A 550,915
1,000,000 6.800%, 1/01/12 No Opt. Call A 1,109,970
1,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/04 at 100 BBB+ 1,188,637
Series T, 5.500%, 7/01/20
4,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, No Opt. Call AAA 1,654,875
Series O, 0.000%, 7/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 9.5%
6,000,000 City of Atlanta (Georgia), Water and Wastewater Revenue 5/09 at 101 AAA 5,025,960
Bonds, Series 1999A, 5.000%, 11/01/38
City of Brunswick, Georgia, Water and Sewerage Revenue Refunding and
Improvement Bonds, Series 1992:
500,000 6.000%, 10/01/11 No Opt. Call AAA 537,505
400,000 6.100%, 10/01/19 No Opt. Call AAA 417,126
2,000,000 Cherokee County Water and Sewerage Authority, Water and No Opt. Call AAA 1,924,340
Sewerage Revenue Refunding and Improvements Bonds, Series
1993, 5.500%, 8/01/23
6,000,000 De Kalb County, Georgia, Water and Sewerage Revenue Bonds, 10/09 at 101 AA 5,177,700
Series 1999, 5.000%, 10/01/28
1,000,000 City of Milledgeville (Georgia), Water and Sewerage Revenue No Opt. Call AAA 1,045,180
and Refunding Bonds, Series 1996, 6.000%, 12/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
$154,320,000 Total Investments - (cost $149,337,848) - 99.4% 147,532,155
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.6% 952,214
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $148,484,369
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
20
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Louisiana Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 5.7%
$ 1,000,000 Parish of DeSoto, Louisiana, Environmental Improvement Revenue 6/05 at 102 A3 $ 1,011,790
Refunding Bonds, 1995 Series B (International Paper Company
Project), 6.550%, 4/01/19 (Alternative Minimum Tax)
1,250,000 Parish of DeSoto, Louisiana, Environmental Improvement Revenue 11/08 at 101 A3 1,107,988
Bonds, 1998 Series A (International Paper Company Project),
5.600%, 11/01/22 (Alternative Minimum Tax)
3,000,000 Parish of Natchitoches, State of Lousiana, Solid Waste Disposal 12/03 at 102 A- 2,754,960
Revenue Bonds (Willamette Industries Project), Series 1993,
5.875%, 12/01/23 (Alternative Minimum Tax)
1,500,000 Parish of St. Charles, State of Louisiana, Pollution Control 11/02 at 102 BBB 1,577,400
Revenue Bonds (Union Carbide Corporation), Series 1992,
7.350%, 11/01/22 (Alternative Minimum Tax)
1,000,000 Parish of St. John the Baptist, State of Louisiana, Environmental 12/08 at 101 Baa2 908,490
Improvement Revenue Bonds (USX Corporation Project), Refunding
Series of 1998, 5.350%, 12/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 3.6%
750,000 Louisiana Public Facilities Authority, College and University 4/00 at 102 A+ 766,785
Equipment and Capital Facilities Revenue Refunding Bonds
(Loyola University Project), Series 1989A, 7.250%, 10/01/09
380,000 Louisiana Public Facilities Authority, College and University 4/02 at 102 A+ 403,397
Equipment and Capital Facilities Revenue Refunding Bonds
(Loyola University Project), Series 1992, 6.750%, 4/01/10
1,000,000 Louisiana Public Facilities Authority, Revenue Bonds (Tulane 12/07 at 102 AAA 944,710
University of Louisiana), Series 1997, 5.600%, 12/15/27
1,000,000 Louisiana Public Facilities Authority, Revenue and Refunding 9/07 at 102 AAA 896,900
Bonds (Xavier University of Lousiana Project), Series 1997,
5.250%, 9/01/27
1,000,000 Louisiana Public Facilities Authority, Revenue and Refunding 2/08 at 102 AAA 856,350
Bonds (Dillard University Project), Series 1998, 5.000%, 2/01/28
960,000 Board of Supervisors of Louisiana State University and 10/08 at 102 AAA 816,874
Agricultural and Mechanical College, Revenue and Refunding
Bonds (University of New Orleans Project), Series 1998,
5.000%, 10/01/30
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 4.7%
1,000,000 Lake Charles, Louisiana, Harbor and Terminal District, Port 12/02 at 102 BBB 1,048,430
Facilities Refunding Revenue Bonds, Series 1992 (Occidental
Petroleum Corporation Project), 7.200%, 12/01/20
500,000 Louisiana Offshore Terminal Authority, Deepwater Port Refunding 9/01 at 102 A 528,225
Revenue Bonds, First Stage Series 1991B (LOOP Inc. Project),
7.200%, 9/01/08
475,000 Louisiana Offshore Terminal Authority, Deepwater Port Refunding 9/00 at 102 A 494,219
Revenue Bonds, First Stage Series E (LOOP Inc. Project),
7.600%, 9/01/10
1,000,000 Louisiana Offshore Terminal Authority, Deepwater Port Refunding 10/08 at 100 A 900,460
Revenue Bonds, Series 1998 (LOOP Inc. Project), 5.200%, 10/01/18
3,150,000 Parish of St. Bernard, State of Louisiana, Exempt Facility 11/06 at 102 AA 3,077,204
Revenue Bonds (Mobil Oil Corporation Project), Series 1996,
5.900%, 11/01/26 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 19.0%
1,000,000 Jefferson Parish Hospital District No. 1, State of Louisiana, 1/09 at 101 AAA 867,740
Fixed Rate Hospital Revenue Bonds (West Jefferson Medical Center),
Series 1998A, 5.000%, 1/01/21
3,000,000 Jefferson Parish Hospital Service District No. 2, State of 7/09 at 101 AAA 2,533,920
Louisiana, Hospital Revenue Bonds, Series 1998, 5.000%, 7/01/28
1,000,000 Louisiana Public Facilities Authority, Hospital Revenue and 7/07 at 101 AAA 915,210
Refunding Bonds (Woman's Hospital Foundation Project),
Series 1997, 5.375%, 10/01/22
1,000,000 Louisiana Public Facilities Authority Hospital Revenue Bonds No Opt. Call AAA 971,910
(Franciscan Missionaries of Our Lady Health System Project),
Series 1998A, 5.750%, 7/01/25
5,000,000 Louisiana Public Facilities Authority, Hospital Revenue and 1/08 at 102 BBB+ 4,139,000
Refunding Bonds (Lincoln Health System Project), Series 1998,
5.150%, 1/01/19
</TABLE>
21
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Louisiana Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 2,300,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds 8/09 at 101 BBB+ $ 1,984,118
(Touro Infirmary Project), Series 1999A, 5.625%, 8/15/29
1,325,000 Louisiana Public Facilities Authority, Revenue Bonds, Series 5/02 at 102 AAA 1,363,809
1992-B (Alton Ochsner Medical Foundation Project), 6.500%, 5/15/22
3,400,000 Louisiana Public Facilities Authority, Health Facilities Revenue No Opt. Call AA+ 3,084,786
Refunding Bonds (Sisters of Mercy Health System, St. Louis, Inc.),
Series 1993A, 5.000%, 6/01/19
2,500,000 Louisiana Public Facilities Authority, Revenue Bonds (General 11/04 at 102 AAA 2,546,350
Health, Inc. Project), Series 1994, 6.375%, 11/01/24
500,000 Louisiana Public Facilities Authority, Revenue Bonds (Mary Bird 1/05 at 102 AAA 505,815
Perkins Cancer Center Project), Series 1994, 6.200%, 1/01/19
2,180,000 St. Tammany Parish Hospital Service District No. 2, State of 10/04 at 102 AAA 2,309,448
Louisiana, Hospital Revenue Bonds, Series 1994, 6.250%, 10/01/14
885,000 Hospital Service District No. 1 of the Parish of Tangipahoa, State 2/04 at 102 AAA 892,779
of Louisiana, Hospital Revenue Bonds, Series 1994, 6.250%, 2/01/24
2,570,000 Hospital Service District No. 1 of the Parish of Terrebonne, State 4/08 at 102 AAA 2,316,470
of Louisiana, Hospital Revenue and Refunding Bonds (Terrebonne
General Medical Center Project), Series 1998, 5.375%, 4/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.6%
750,000 Lake Charles, Louisiana, Non-Profit Housing Development 4/00 at 100 AAA 750,780
Corporation, Mortgage Revenue Refunding Bonds, Series 1990A
(FHA-Insured Mortgage Loan - Section 8 Assisted Chateau
Project), 7.875%, 2/15/25
735,000 Louisiana Public Facilities Authority, Revenue Bonds (Walmsley 6/03 at 103 AAA 773,661
Housing Corporation), Series 1989A, 7.500%, 6/01/21
500,000 Louisiana Public Facilities Authority, Multifamily Housing 11/01 at 102 AA 524,125
Revenue Bonds (VOA National Housing Corporation Projects), Series
1991, 7.750%, 11/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 11.9%
940,000 East Baton Rouge Mortgage Finance Authority, Single Family 8/00 at 102 Aaa 964,496
Mortgage Revenue Bonds (GNMA Mortgage Backed Securities Program),
Series 1990A, 7.875%, 8/01/23 (Alternative Minimum Tax)
2,235,000 East Baton Rouge Mortgage Finance Authority, Single Family 10/07 at 102 Aaa 2,145,756
Mortgage Revenue Refunding Bonds (GNMA and FNMA Mortgage-Backed
Securities Program), Series 1997D, 5.900%, 10/01/30
(Alternative Minimum Tax)
2,800,000 East Baton Rouge Mortgage Finance Authority, Single Family 10/08 at 101 Aaa 2,504,628
Mortgage Revenue Refunding Bonds (GNMA and FNMA Mortgage-Backed
Securities Program), Series 1998C-1, 5.200%, 10/01/23
255,000 Louisiana Housing Finance Agency, Single Family Mortgage Revenue 6/05 at 102 Aaa 260,750
Bonds, Series 1995A-2, 6.550%, 12/01/26 (Alternative Minimum Tax)
Louisiana Housing Finance Agency, Tax-Exempt Bonds, Single Family
Mortgage Revenue Bonds, Series 1997B-2:
975,000 5.600%, 6/01/17 (Alternative Minimum Tax) 6/07 at 102 Aaa 929,039
1,390,000 5.500%, 12/01/22 6/07 at 102 Aaa 1,297,343
1,500,000 Louisiana Housing Finance Agency, Tax-Exempt Bonds, Single Family 12/07 at 101 Aaa 1,304,460
Mortgage Revenue Bonds (Home Ownership Program), Series 1998B-2,
5.250%, 6/01/29 (Alternative Minimum Tax)
450,000 New Orleans Home Mortgage Authority, Single Family Mortgage 1/00 at 102 Aaa 459,329
Revenue Bonds, Series 1988-C1, 7.750%, 12/01/22 (Alternative
Minimum Tax)
1,000,000 New Orleans Home Mortgage Authority, Single Family Mortgage 12/06 at 102 Aaa 1,000,000
Revenue Bonds, Series 1996A, 6.100%, 12/01/29 (Alternative
Minimum Tax)
1,000,000 New Orleans Louisiana Home Mortgage Authority, Single Family 12/07 at 102 Aaa 946,800
Mortgage Revenue Bonds, Series 1997A, 5.850%, 12/01/30
(Alternative Minimum Tax)
1,000,000 New Orleans Home Mortgage Authority, Single Family Mortgage 12/08 at 101 Aaa 884,070
Revenue Refunding Bonds, Series 1998B-2, 5.200%, 12/01/21
(Alternative Minimum Tax)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
Rapides Finance Authority (Louisiana), Single Family Mortgage
Revenue Refunding Bonds (GNMA and Fannie Mae Mortgage-Backed
Securities Program), Series 1998B:
$ 800,000 5.350%, 6/01/26 6/08 at 102 Aaa $ 726,512
2,000,000 5.450%, 12/01/30 (Alternative Minimum Tax) 6/08 at 102 Aaa 1,779,500
129,153 St. Bernard Parish Home Mortgage Authority, Single Family No Opt. Call A1 135,911
Mortgage Revenue Refunding Bonds, 1991 Series A, 8.000%, 3/25/12
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 3.8%
3,000,000 Louisiana Housing Finance Agency, Mortgage Revenue Bonds (GNMA 9/05 at 103 AAA 3,117,000
Collateralized Mortgage Loan - St. Dominic Assisted Care Facility),
Series 1995, 6.950%, 9/01/36
1,740,000 Louisiana Housing Finance Agency, Mortgage Revenue Bonds (GNMA 1/04 at 101 AAA 1,818,944
Collateralized Mortgage Loan - Villa Maria Retirement Center Project),
Series 1993, 7.100%, 1/20/35
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 10.7%
500,000 State of Louisiana, General Obligation Bonds, Series 1993-B, No Opt. Call AAA 510,980
5.625%, 8/01/13
City of New Orleans, Louisiana, General Obligation Refunding
Bonds, Series 1991:
2,000,000 0.000%, 9/01/10 No Opt. Call AAA 1,125,360
5,785,000 0.000%, 9/01/16 No Opt. Call AAA 2,159,251
3,000,000 Parishwide School District of the Parish of Orleans, State of 3/06 at 100 AAA 2,641,470
Louisiana, General Obligation School Bonds, Series 1996,
5.000%, 9/01/20
1,000,000 Parishwide School District of the Parish of Orleans, State of 3/08 at 100 Aaa 889,340
Louisiana, General Obligation School Bonds, Series 1998A,
5.125%, 9/01/22
13,875,000 Orleans Parish School Board, Public School Refunding Bonds, No Opt. Call AAA 5,659,335
Series 1991, 0.000%, 2/01/15
1,000,000 East Ouachita School District of the Parish of Ouachita, State 3/09 at 100 AAA 867,820
of Louisiana, General Obligation School Bonds, Series 1999,
5.000%, 3/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 18.6%
1,000,000 Jefferson Sales Tax District, Parish of Jefferson, State of 12/02 at 100 AAA 1,064,710
Louisiana, Special Sales Tax Revenue Bonds, Series 1991B,
6.750%, 12/01/06
1,000,000 City of Lafayette, State of Louisiana, Public Improvement Sales 3/07 at 101 AAA 869,250
Tax Bonds, Series 1998A, 5.000%, 5/01/22
3,000,000 City of Lafayette, State of Louisiana, Public Improvement Sales 3/09 at 101 1/2 AAA 2,862,420
Tax Bonds, Series 1999B, 5.625%, 3/01/24
3,000,000 Louisiana Local Government Environmental Facilities and No Opt. Call AAA 2,507,340
Community Development Authority, Revenue Bonds (Capital Projects
and Equipment Acquisition Program), Series 1999, 4.500%, 12/01/18
1,000,000 Office Facilities Corporation, Louisiana Lease Revenue Bonds 3/09 at 101 AAA 927,330
(Louisiana State Capitol Complex Program), Series 1999A,
5.250%, 3/01/18
1,870,000 Louisiana Stadium and Exposition District, Hotel Occupancy Tax 7/09 at 102 AAA 1,576,092
Refunding Bonds, Series 1998B, 4.750%, 7/01/21
1,500,000 Office Facilities Corporation (A Louisiana Non Profit 12/01 at 103 BBB+ 1,600,140
Corporation), Capital Facilities Bonds (Statewide Lease/Purchase
Program), Series 1990, 7.750%, 12/01/10
Puerto Rico Highway and Transportation Authority, Highway Revenue
Bonds, Series Y of 1996:
6,150,000 5.500%, 7/01/36 7/16 at 100 A 5,675,651
1,550,000 5.000%, 7/01/36 7/16 at 100 A 1,304,573
2,995,000 City of Shreveport, State of Louisiana, Certificates of 10/09 at 102 AAA 2,725,929
Indebtedness, Series 1998-A, 5.000%, 10/01/16
3,000,000 Virgin Islands Public Finance Authority, Revenue Bonds (Virgin 10/10 at 101 BBB- 2,991,300
Islands Gross Receipts Taxes Loan Note), Series 1999A,
6.375%, 10/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.8%
505,000 New Orleans Aviation Board, Revenue Bonds, Series 1997B-1, 10/07 at 102 AAA 459,808
5.450%, 10/01/27 (Alternative Minimum Tax)
2,100,000 City of Shreveport, State of Louisiana, Airport System Revenue 1/08 at 102 AAA 1,888,677
Bonds, Series 1997A, 5.375%, 1/01/28 (Alternative Minimum Tax)
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Louisiana Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 9.4%
$ 715,000 Louisiana Public Facilities Authority, Hospital Revenue Refunding No Opt. Call AAA $ 832,217
Bonds (Southern Baptist Hospitals, Inc. Project), Series 1986,
8.000%, 5/15/12
1,125,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds 10/02 at 102 A3*** 1,223,258
(Woman's Hospital Foundation Project), Series 1992, 7.250%, 10/01/22
(Pre-refunded to 10/01/02)
Louisiana Public Facilities Authority, Hospital Revenue Refunding Bonds
(Lafayette General Medical Center Project), Series 1992:
1,000,000 6.400%, 10/01/12 (Pre-refunded to 10/01/02) 10/02 at 102 AAA 1,069,690
2,000,000 6.500%, 10/01/22 (Pre-refunded to 10/01/02) 10/02 at 102 AAA 2,144,660
10,000,000 Louisiana Public Facilities Authority, Revenue Bonds, Custodial No Opt. Call AAA 2,988,700
Receipts, Series 1990B, 0.000%, 12/01/19
2,000,000 City of New Orleans Audubon Park Commission, Aquarium Revenue 4/02 at 102 N/R*** 2,187,800
Bonds, Series 1992, 8.000%, 4/01/12 (Pre-refunded to 4/01/02)
1,400,000 Ouachita Parish (Louisiana), Hospital Service District No. 1 7/01 at 102 A*** 1,490,846
Revenue Bonds (Glenwood Regional Medical Center), Series 1991,
7.500%, 7/01/21 (Pre-refunded to 7/01/01)
250,000 Shreveport Home Mortgage Authority, Single Family Mortgage No Opt. Call Aaa 270,945
Revenue Bonds, Series 1979A, 6.750%, 9/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.2%
3,000,000 Lake Charles Harbor and Terminal District (Louisiana), Port 8/02 at 103 A3 3,277,710
Facilities Revenue Refunding Bonds, Series 1992 (Trunkline LNG
Company Project), Panhandle Eastern Corporation, 7.750%, 8/15/22
1,000,000 Parish of St. Charles, Louisiana, Enviromental Improvement 11/02 at 102 BBB 946,890
Revenue Bonds (Louisiana Power and Light Company Project), Series
1993A, 6.200%, 5/01/23 (Alternative Minimum Tax)
1,000,000 Parish of St. Charles, Lousiana, Enviromental Revenue Bonds 11/00 at 102 BBB- 966,160
(Louisiana Power and Light Company Project), Series 1995, 6.375%,
11/01/25 (Alternative Minimum Tax)
1,500,000 Parish of St. Charles, Louisiana, Solid Waste Disposal Revenue 12/02 at 102 BBB 1,557,450
Bonds (Louisiana Power and Light Company Project), Series 1992A,
7.000%, 12/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 1.2%
1,500,000 Louisiana Public Facilities Authority, Revenue Bonds, Series 2/03 at 101 AA 1,564,362
1992, Baton Rouge Water Works Company Project, 6.400%, 2/01/10
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$151,144,153 Total Investments - (cost $128,427,194) - 97.2% 125,676,105
============-----------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 0.8%
$ 1,000,000 Louisiana Offshore Terminal Authority, Variable Rate Demand VMIG-1 1,000,000
Bonds, 3.600%, 9/01/06+
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.0% 2,599,656
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $129,275,761
===================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
+ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
24
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship North Carolina Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 8.7%
$1,400,000 The Haywood County Industrial Facilities and Pollution Control 9/05 at 102 Baa1 $1,356,348
Financing Authority (North Carolina), Environmental Improvement
Revenue Bonds (Champion International Corporation Project),
Series 1995, 6.250%, 9/01/25 (Alternative Minimum Tax)
4,000,000 The Haywood County Industrial Facilities and Pollution Control 10/03 at 102 Baa1 3,568,680
Financing Authority (North Carolina), Solid Waste Disposal Revenue
Bonds (Champion International Corporation Project) Series 1993,
5.500%, 10/01/18 (Alternative Minimum Tax)
3,100,000 The Haywood County Industrial Facilities and Pollution Control 3/06 at 102 Baa1 2,928,105
Financing Authority (North Carolina), Pollution Control Refunding
Revenue Bonds (Champion International Corporation Project),
Series 1995, 6.000%, 3/01/20
1,900,000 Martin County Industrial Facilities and Pollution Control 9/01 at 103 A 2,009,193
Financing Authority, Solid Waste Disposal Revenue Bonds (Weyerhaeuser
Company Project), Series 1991, 7.250%, 9/01/14 (Alternative Minimum Tax)
6,000,000 Martin County Industrial Facilities and Pollution Control Financing 5/04 at 102 A 6,203,880
Authority, Solid Waste Disposal Revenue Bonds (Weyerhaeuser Company
Project), Series 1994, 6.800%, 5/01/24 (Alternative Minimum Tax)
1,000,000 Martin County Industrial Facilities and Pollution Control Financing 11/05 at 102 A 956,950
Authority, Solid Waste Disposal Revenue Bonds (Weyerhaeuser Company
Project), Series 1995, 6.000%, 11/01/25 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 4.8%
North Carolina Educational Facilities Finance Agency, Revenue Bonds
(High Point College Project), Series 1989:
165,000 7.050%, 12/01/05 12/99 at 102 A3 168,632
175,000 7.100%, 12/01/06 12/99 at 102 A3 178,859
4,220,000 North Carolina Educational Facilities Finance Agency, Refunding 10/06 at 102 AA+ 3,854,126
Revenue Bonds (Duke University Project), Series 1996B, 5.000%, 10/01/17
1,000,000 North Carolina State Education Assistance Authority, Guaranteed Student 7/05 at 102 A 1,008,620
Loan Revenue Bonds, 1995 Series A (Subordinate Lien), 6.300%, 7/01/15
(Alternative Minimum Tax)
295,000 University of North Carolina at Chapel Hill, Student Fee Revenue Bonds, 6/01 at 102 AAA 312,384
Series 1991 (Student Recreation Center), 7.000%, 6/01/08
University of North Carolina at Chapel Hill, Utilities System Revenue
Refunding Bonds, Series 1997:
4,000,000 0.000%, 8/01/15 No Opt. Call AA 1,628,000
4,265,000 0.000%, 8/01/18 No Opt. Call AA 1,417,046
2,750,000 0.000%, 8/01/20 No Opt. Call AA 800,635
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 0.6%
1,100,000 New Hanover County Industrial Facilities and Pollution Control 7/02 at 102 BBB 1,125,982
Financing Authority, Revenue Refunding Bonds (Occidental Petroleum
Corporation Project), Series 1992, 6.700%, 7/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 16.9%
5,500,000 The Charlotte-Mecklenburg Hospital Authority (North Carolina), Health 1/06 at 102 AA 5,314,540
Care System Revenue Refunding Bonds, Series A, 5.875%, 1/15/26
6,000,000 The Charlotte-Mecklenburg Hospital Authority (North Carolina), Health 1/07 at 102 AA 5,238,480
Care System Revenue Bonds, Series 1997A, 5.125%, 1/15/22
4,000,000 County of Cumberland, North Carolina, Hospital Facility Revenue Bonds 10/09 at 101 A- 3,374,360
(Cumberland County Hospital System, Inc.), Series 1999, 5.250%,
10/01/29
</TABLE>
25
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship North Carolina Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 4,500,000 North Carolina Medical Care Commission, Health Care Facilities 6/08 at 101 AA $ 3,636,315
Revenue Bonds (Duke University Health System), Series 1998A,
4.750%, 6/01/28
North Carolina Medical Care Commission, Health Care Facilities Revenue
Bonds (Scotland Memorial Hospital Project), Series 1999:
625,000 5.500%, 10/01/19 10/08 at 102 AA 581,794
1,200,000 5.500%, 10/01/29 10/08 at 102 AA 1,084,068
1,000,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 2/02 at 102 Baa3 1,079,220
(Annie Penn Memorial Hospital Project), Series 1991, 7.500%, 8/15/21
2,000,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 10/08 at 101 AAA 1,743,000
(Mission-St. Joseph's Health System), Series 1998, 5.125%, 10/01/28
3,500,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 6/09 at 102 A 3,469,725
(Southeastern Regional Medical Center), Series 1999, 6.250%, 6/01/29
2,500,000 Northern Hospital District, Surry County, North Carolina, Health 10/01 at 102 BBB- 2,571,350
Care Facilities Revenue Refunding Bonds, Series 1991, 7.875%, 10/01/21
5,750,000 Board of Governors of the University of North Carolina, 2/06 at 102 AA 5,103,815
University of North Carolina Hospitals at Chapel Hill, Revenue Bonds,
Series 1996, 5.250%, 2/15/26
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.0%
1,340,000 Housing Authority of the City of Asheville (North Carolina), 11/07 at 102 AAA 1,249,711
Multifamily Housing Revenue Bonds (GNMA-Collateralized - Woodridge
Apartments), Series 1997, 5.750%, 11/20/29 (Alternative Minimum Tax)
620,000 North Carolina Housing Finance Agency, Multifamily Revenue Refunding 7/02 at 102 AA 650,014
Bonds (1992 Refunding Bond Resolution), Series B, 6.900%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 20.8%
515,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/01 at 102 AA 532,654
Series O (1985 Resolution), 7.600%, 3/01/21 (Alternative Minimum Tax)
7,300,000 North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, 7/09 at 100 AA 6,758,048
Series 5-A (1998 Trust Agreement), 5.625%, 7/01/30 (Alternative
Minimum Tax)
North Carolina Housing Finance Agency, Single Family Revenue Bonds,
Series Y (1985 Resolution):
1,975,000 6.300%, 9/01/15 9/04 at 102 AA 2,028,207
1,815,000 6.350%, 3/01/18 9/04 at 102 AA 1,862,789
3,280,000 North Carolina Housing Finance Agency, Home Ownership Revenue 7/09 at 100 AA 3,283,050
Bonds, Series 6-A (1998 Trust Agreement), 6.200%, 1/01/29 (WI)
1,865,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/05 at 102 AA 1,904,687
Series BB (1985 Resolution), 6.500%, 9/01/26 (Alternative Minimum Tax)
3,360,000 North Carolina Housing Finance Agency, Single Family Revenue Bond, 3/05 at 102 AA 3,379,051
Series DD (1985 Resolution), 6.200%, 9/01/27 (Alternative Minimum Tax)
4,360,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/06 at 102 AA 4,387,424
Series LL (1985 Resolution), 6.200%, 3/01/26 (Alternative Minimum Tax)
5,550,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds,
Series RR (1985 Resolution), 5.850%, 9/01/28 (Alternative Minimum Tax) 3/07 at 101 1/2 AA 5,331,885
1,635,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/08 at 101 AA 1,619,484
Series VV (1985 Resolution), 5.250%, 3/01/17 (Alternative Minimum Tax)
2,500,000 North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, 7/08 at 101 AA 2,222,000
Series 2-A (1998 Trust Agreement), 5.250%, 7/01/26 (Alternative
Minimum Tax)
4,370,000 North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, 1/09 at 101 AA 3,796,787
Series 3-A (1998 Trust Agreement), 5.200%, 7/01/26 (Alternative
Minimum Tax)
4,000,000 North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, 1/09 at 100 AA 3,583,280
Series 4-A (1998 Trust Agreement), 5.300%, 7/01/26 (Alternative
Minimum Tax)
480,000 Winston Salem, North Carolina, Single Family Mortgage Revenue Bonds, 9/00 at 102 A1 491,251
Series 1990, 8.000%, 9/01/07 (Alternative Minimum Tax)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial/Other - 0.7%
$ 1,400,000 Gaston County Industrial Facilities and Pollution Control 11/01 at 103 N/R $ 1,472,996
Financing Authority, Industrial Development Revenue Bonds,
Series 1985 (ABB-Combustion Engineering Inc.), 8.850%, 11/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 13.5%
500,000 City of Asheville, North Carolina, Certificates of Participation, 2/02 at 102 A1 526,010
Series 1992, 6.500%, 2/01/08
1,000,000 City of Asheville, North Carolina, Certificates of Participation, 6/07 at 101 AAA 916,170
Series 1997A, 5.125%, 6/01/18
3,445,000 City of Charlotte, North Carolina, General Obligation Water and 4/05 at 102 AAA 3,291,284
Sewer Bonds, Series 1995A, 5.400%, 4/01/20
600,000 City of Durham, North Carolina, Certificates of Participation, 6/05 at 102 AA 606,354
Series 1995, 5.800%, 6/01/15
County of Harnett, North Carolina, Certificates of Participation,
Series 1994 (Harnett County Projects):
1,000,000 6.200%, 12/01/06 12/04 at 102 AAA 1,075,860
1,750,000 6.200%, 12/01/09 12/04 at 102 AAA 1,863,418
500,000 6.400%, 12/01/14 12/04 at 102 AAA 537,305
County of Pitt, North Carolina, Certificates of Participation
(Pitt County Public Facilities Project), Series 1997A:
1,250,000 5.550%, 4/01/12 4/07 at 102 AAA 1,270,375
1,000,000 5.850%, 4/01/17 4/07 at 102 AAA 1,006,700
Puerto Rico Highway and Transportation Authority, Highway Revenue
Bonds, Series Y of 1996:
10,000,000 5.500%, 7/01/36 7/16 at 100 A 9,228,700
2,000,000 5.500%, 7/01/36 7/16 at 100 AAA 1,879,320
555,000 Puerto Rico Infrastructure Finance Authority, Special Tax Revenue 1/00 at 101 BBB+ 562,076
Bonds, Series 1988A, 7.750%, 7/01/08
1,000,000 Puerto Rico Public Buildings Authority, Revenue Refunding Bonds, No Opt. Call A 957,940
Series L Guaranteed by the Commonwealth of Puerto Rico, 5.500%, 7/01/21
Town of Ramseur, North Carolina, General Obligation Water Refunding Bonds,
Series 1997:
120,000 5.750%, 6/01/18 6/07 at 102 N/R 114,548
125,000 5.750%, 6/01/19 6/07 at 102 N/R 118,348
125,000 5.750%, 6/01/20 6/07 at 102 N/R 117,351
130,000 5.750%, 6/01/21 6/07 at 102 N/R 121,107
105,000 5.750%, 6/01/22 6/07 at 102 N/R 97,591
715,000 County of Stokes, North Carolina, Certificates of Participation, 3/01 at 102 AAA 750,864
Series 1991, 7.000%, 3/01/06
1,410,000 County of Union, North Carolina, Certificates of Participation, 4/03 at 102 AAA 1,493,726
Series 1992, 6.375%, 4/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.4%
6,000,000 City of Charlotte, North Carolina, Airport Revenue Bonds, Series 7/09 at 101 AAA 5,941,320
1999B, 6.000%, 7/01/28 (Alternative Minimum Tax) (WI)
710,000 Piedmont Triad Airport Authority (North Carolina), Airport 7/09 at 101 AAA 706,131
Revenue Bonds, Series 1999B, 6.000%, 7/01/21 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 7.4%
135,000 Asheville Housing Development Corporation, First Lien Revenue 11/09 at 100 N/R*** 169,892
Bonds, Series 1980, 10.500%, 5/01/11 (Pre-refunded to 11/01/09)
1,500,000 County of Buncombe, North Carolina, Certificates of Participation 12/02 at 102 Aa3*** 1,619,475
(1992 Buncombe County Project), 6.625%, 12/01/10 (Pre-refunded to
12/01/02)
1,900,000 Craven Regional Medical Authority (North Carolina), Insured Health 10/00 at 102 AAA 1,987,115
Care Facilities Revenue Bonds, Series 1990, 7.200%, 10/01/19
(Pre-refunded to 10/01/00)
705,000 City of Durham, North Carolina, Certificates of Participation 9/00 at 102 Aa*** 735,780
(1990 Financing Project), 7.250%, 9/01/10 (Pre-refunded to 9/01/00)
1,000,000 City of Durham, North Carolina, Certificates of Participation, 12/01 at 102 Aa3*** 1,066,000
Series 1991, 6.750%, 12/01/11 (Pre-refunded to 12/01/01)
</TABLE>
27
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship North Carolina Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 995,000 North Carolina Eastern Municipal Power Agency, Power System No Opt. Call AAA $ 1,087,008
Revenue Refunding Bonds, Series 1991A, 6.500%, 1/01/18
55,000 North Carolina Medical Care Commission, Hospital Revenue No Opt. Call AAA 61,756
Bonds (Memorial Mission Hospital Project), Series A, 7.625%, 10/01/08
North Carolina Medical Care Commission, Hospital Revenue Bonds (Halifax
Memorial Hospital Project), Series 1992:
1,275,000 6.750%, 8/15/14 (Pre-refunded to 8/15/02) 8/02 at 102 Baa1*** 1,368,343
1,000,000 6.750%, 8/15/24 (Pre-refunded to 8/15/02) 8/02 at 102 Baa1*** 1,073,210
3,400,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 10/00 at 102 AA*** 3,579,248
(Community General Hospital Of Thomasville), Series 1990, 8.100%,
10/01/15 (Pre-refunded to 10/01/00)
700,000 County of Pender, North Carolina, Certificates of 6/01 at 102 Baa1*** 748,314
Participation, Series 1991, 7.700%, 6/01/11 (Pre-refunded to 6/01/01)
1,000,000 County of Pitt, North Carolina, Certificates of Participation, 4/00 at 102 AAA 1,029,650
6.900%, 4/01/08 (Pre-refunded to 4/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 19.3%
Coastal Regional Solid Waste Management Authority (North Carolina),
Solid Waste System Revenue Bonds, Series 1992:
1,000,000 6.300%, 6/01/04 6/02 at 102 A 1,061,890
1,000,000 6.500%, 6/01/08 6/02 at 102 A 1,066,580
2,000,000 City of Concord, North Carolina, Utilities Systems Revenue 12/08 at 101 AAA 1,825,820
Bonds, Series 1998A, 5.000%, 12/01/17
1,845,000 City of Fayetteville, North Carolina, Public Works Commission 3/05 at 102 AAA 1,752,916
Revenue Bonds, Series 1995A, 5.250%, 3/01/16
5,900,000 City of Fayetteville, North Carolina, Public Works Commission 3/07 at 101 AAA 5,262,092
Revenue Bonds, Series 1997, 5.125%, 3/01/24
1,500,000 City of Gastonia, North Carolina, Combined Utilities System 5/08 at 102 AAA 1,337,310
Revenue Bonds, Series 1998, 4.750%, 5/01/15
2,000,000 City of Greenville, North Carolina, Greenville Utilities 9/04 at 102 A+ 2,028,000
Commission, Combined Enterprise System Revenue Bonds, Series
1994, 6.000%, 9/01/16
5,300,000 North Carolina Eastern Municipal Power Agency, Power System No Opt. Call AAA 5,426,405
Revenue Bonds, Refunding Series 1993B, 6.000%, 1/01/18
2,400,000 North Carolina Eastern Municipal Power Agency, Power System 1/08 at 101 AAA 2,200,080
Revenue Bonds, Refunding Series 1997A, 5.375%, 1/01/24
5,000,000 North Carolina Eastern Municipal Power Agency, Power System 1/10 at 101 BBB 5,022,850
Revenue Bonds, Series 1999D, 6.750%, 1/01/26
5,665,000 North Carolina Municipal Power Agency, Number 1 Catawba 1/10 at 101 BBB+ 5,651,971
Electric Revenue Bonds, Series 1999B, 6.500%, 1/01/20
5,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/08 at 101 1/2 BBB+ 4,509,435
Series DD, 5.000%, 7/01/28
870,000 City of Shelby, North Carolina, Combined Enterprise System 5/05 at 102 A- 830,119
Revenue Bonds, Series 1995A, 5.500%, 5/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 3.7%
1,000,000 County of Dare, North Carolina, Utilities System Revenue 6/08 at 102 AAA 840,040
Bonds, Series 1998A, 4.750%, 6/01/24
3,400,000 City of Greensboro, North Carolina, Combined Enterprise 6/05 at 102 AA- 3,211,708
System Revenue Bonds, Series 1995A, 5.375%, 6/01/19
2,500,000 City of Raleigh, North Carolina, Combined Enterprise System 3/09 at 101 AA+ 2,101,725
Revenue Bonds, Series 1999, 4.750%, 3/01/24
750,000 City of Winston-Salem, North Carolina, Water and Sewer System 6/05 at 102 AA+ 754,785
Revenue Bonds, Series 1995B, 5.600%, 6/01/14
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 406,337 Woodfin Treatment Facility, Inc. (North Carolina), Proportionate No Opt. Call N/R $ 401,254
Interest Certificates,
5.500%, 12/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
$213,801,337 Total Investments - (cost $203,017,342) - 100.8% 198,260,694
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.8)% (1,661,828)
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $196,598,866
===================================================================================================================
</TABLE>
* Optional Call Provisions Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
29
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Tennessee Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials - 7.9%
$ 3,000,000 The Industrial Development Board of the City of Chattanooga (Tennessee), 7/03 at 103 AA- $ 3,072,210
Pollution Control Revenue Bonds, Series 1982 A (E.I. du Pont de
Nemours and Company), 6.350%, 7/01/22
12,000,000 The Industrial Development Board of Humphreys County, Tennessee, 5/04 at 102 AA- 12,541,920
Solid Waste Disposal Facility Bonds (E.I. du Pont de Nemours and
Company Project), 6.700%, 5/01/24 (Alternative Minimum Tax)
2,500,000 The Industrial Development Board of the County of McMinn Pollution Control 3/01 at 102 Baa1 2,590,875
Facilities Revenue Bonds, Series 1991 (Calhoun Newsprint Company Project
- Bowater Incorporated Obligor), 7.625%, 3/01/16 (Alternative Minimum Tax)
4,950,000 The Industrial Development Board of the County of McMinn (Tennessee), 12/02 at 102 Baa1 5,272,740
Solid Waste Recycling Facilities Revenue Bonds, Series 1992 (Calhoun
Newsprint Company Project - Bowater Incorporated Obligor), 7.400%,
12/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclical - 2.4%
7,000,000 The Industrial Development Board of Maury County, Tennessee, 9/04 at 102 A 7,092,400
Multi-Modal Interchangeable Rate Pollution Control Refunding Revenue
Bonds (Saturn Corporation Project), Series 1994, 6.500%, 9/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 2.8%
6,750,000 The Industrial Development Board of Loudon County (Tennessee), Solid Waste 2/03 at 102 AA 6,759,585
Disposal Revenue Bonds (Kimberly-Clark Corporation Project), Series 1993,
6.200%, 2/01/23 (Alternative Minimum Tax)
250,000 Memphis, Shelby County, Tennessee, Industrial Development No Opt. Call A1 260,218
Board, Industrial Development Revenue Bonds (Colonial Baking
Company - Memphis Project), Series 1981, 9.500%, 4/01/01
1,245,000 Industrial Development Board of the City of South Fulton, 10/05 at 102 A3 1,243,020
Tennessee, Industrial Development Revenue Bonds (Tyson
Foods, Inc. Project), Series 1995, 6.400%, 10/01/20
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 1.3%
3,705,000 Tennessee State School Bond Authority, Higher Educational 5/02 at 101 1/2 AAA 3,913,629
Facilities Bonds, 1992 Series A, 6.250%, 5/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 18.1%
3,060,000 Blount County, Tennessee, Hospital Revenue Improvement Bonds, 7/08 at 100 Baa1 2,568,839
Series 1998B, 5.125%, 7/01/19
4,000,000 The Health, Educational and Housing Facility Board of the 6/08 at 101 A- 3,322,760
City of Chattanooga, Tennessee, Hospital Improvement and
Refunding Revenue Bonds, Series 1998 (Siskin Hospital for
Physical Rehabilitation, Inc. Project), 5.250%, 6/01/28
1,550,000 The Industrial Development Board of the City of Cookeville, 10/03 at 102 A 1,568,600
Tennessee, Hospital Refunding Revenue Bonds, Series 1993
(Cookeville General Hospital Project), 5.750%, 10/01/10
7,350,000 The City of Jackson, Tennessee, Hospital Revenue Refunding 4/05 at 102 AAA 7,230,857
and Improvement Bonds, Series 1995 (Jackson-Madison County
General Hospital Project), 5.625%, 4/01/15
2,090,000 The Health and Educational Facilities Board of Johnson City, 7/01 at 102 AAA 2,198,074
Tennessee, Hospital Revenue Refunding and Improvement Bonds, Series
1991 (Johnson City Medical Center Hospital), 6.750%, 7/01/16
The Health and Educational Facilities Board of Johnson City, Tennessee,
Hospital Revenue Refunding and Improvement Bonds, Series 1998C
(Johnson City Medical Center Hospital):
5,000,000 5.125%, 7/01/25 1/09 at 101 AAA 4,381,100
5,000,000 5.250%, 7/01/28 1/09 at 101 AAA 4,439,100
The Health, Educational and Housing Facilities Board of the County
of Knox (Tennessee), Hospital Revenue Bonds, Series 1993A (Fort
Sanders Alliance Obligated Group):
1,000,000 6.250%, 1/01/13 No Opt. Call AAA 1,068,780
3,000,000 5.250%, 1/01/15 No Opt. Call AAA 2,862,990
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$16,000,000 The Health, Educational, and Housing Facilities Board of the 4/09 at 101 Baa1 $14,080,000
County of Knox, Revenue Bonds, Series 1999 (University Health
System, Inc.), 5.625%, 4/01/29
1,250,000 The Health and Educational Facilites Board of the Metropolitan 11/05 at 102 AAA 1,194,100
Government of Nashville and Davidson County, Tennessee, Hospital
Revenue Bonds, Series 1995 (Adventist Health System/Sunbelt
Obligated Group), 5.750%, 11/15/25
2,395,000 The Health and Educational Facilities Board of the Metropolitan 11/01 at 102 AAA 2,546,196
Government of Nashville and Davidson County, Tennessee, Hospital
Revenue Bonds, Series 1991 (Adventist Health System - Sunbelt, Inc.),
7.000%, 11/15/16
4,000,000 Shelby County, Tennessee, Health Educational and Housing 8/05 at 100 AAA 3,777,160
Facility Board, Hospital Revenue Refunding Bonds, Methodist
Health System Inc., Series 1995, 5.250%, 8/01/15
2,500,000 Sumner County, Tennessee, Health Educational and Housing 11/04 at 102 A- 2,706,600
Facilities Board, Revenue Refunding Bonds, Sumner Regional Health
System Inc., Series 1994, 7.500%, 11/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 3.3%
1,200,000 The Health, Educational and Housing Facility Board of the City 7/03 at 102 Aaa 1,208,976
of Chattanooga, Tennessee, Multifamily Mortgage Revenue Refunding
Bonds, Series 1993A (Windridge Apartments - FHA-Insured Mortgage),
5.950%, 7/01/14
The Health, Educational and Housing Facility Board of the City of
Chattanooga, Tennessee, Housing Revenue Bonds (GNMA Collateralized
- Rainbow Creek Apartments Project), Series 1999:
500,000 6.125%, 11/20/19 (Alternative Minimum Tax) (WI) 11/09 at 102 AAA 497,140
3,955,000 6.375%, 11/20/39 (Alternative Minimum Tax) (WI) 11/09 at 102 AAA 3,926,564
3,500,000 The Industrial Development Board of the City of Franklin 10/06 at 102 AAA 3,467,415
(Tennessee), Multifamily Housing Revenue Refunding Bonds (The
Landings Apartments Project), Senior Series 1996A, 6.000%, 10/01/26
Metropolitan Government of Nashville and Davidson County, Tennessee, Health
and Educational Facilities Board, Housing Mortgage Revenue Bonds (Herman
Street), Series 1992:
250,000 7.000%, 6/01/17 6/02 at 103 AAA 263,275
495,000 7.250%, 6/01/32 6/02 at 103 AAA 523,294
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 13.4%
210,000 County of Hamilton, Tennessee, Single Family Mortgage Revenue 9/00 at 102 AAA 215,809
Bonds (Home Purchase and Rehabilitation Program), Series 1990,
8.000%, 9/01/23 (Alternative Minimum Tax)
6,000,000 Tennessee Housing Development Agency, Homeownership Program 7/06 at 102 AA 6,100,620
Bonds, Issue 4A, 6.375%, 7/01/22 (Alternative Minimum Tax)
990,000 Tennessee Housing Development Agency, Homeownership Program 7/07 at 102 AA 984,357
Bonds, Issue 1996-3, 5.850%, 7/01/17 (Alternative Minimum Tax)
120,000 Tennessee Housing Development Agency, Homeownership Program 7/01 at 102 AA 121,484
Bonds, Issue U, 7.400%, 7/01/16
3,900,000 Tennessee Housing Development Agency, Homeownership Program 7/01 at 102 AA 3,974,919
Bonds, Issue T, 7.375%, 7/01/23 (Alternative Minimum Tax)
2,655,000 Tennessee Housing Development Agency, Homeownership Program 7/02 at 102 AA 2,722,862
Bonds, Issue WR, 6.800%, 7/01/17
Tennessee Housing Development Agency, Homeownership Program Bonds,
Issue 1998-2:
4,000,000 5.350%, 7/01/23 (Alternative Minimum Tax) 1/09 at 101 AA 3,575,840
10,145,000 5.375%, 7/01/29 (Alternative Minimum Tax) 1/09 at 101 AA 8,978,832
7,700,000 Tennessee Housing Development Agency, Homeownership Program 1/09 at 101 AA 6,908,902
Bonds, Issue 1996-5B (Remarketing), 5.375%, 7/01/23 (Alternative
Minimum Tax)
5,500,000 Tennessee Housing Development Agency, Homeownership Program 1/09 at 101 AA 5,411,450
Bonds, Issue 1999-3, 6.000%, 1/01/20 (Alternative Minimum Tax)
1,000,000 Tennessee Housing Development Agency, Mortgage Finance Program 7/04 at 102 A+ 1,029,700
Bonds, 1994 Series A, 6.900%, 7/01/25 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 2.2%
2,925,000 The Health and Educational Facilities Board of the Metropolitan 2/08 at 102 AA 2,651,893
Government of Nashville and Davidson County, Tennessee, Multi-Modal
Interchangeable Rate Health Facility Revenue Bonds (Richland Place,
Inc. Project), Series 1993, 5.500%, 5/01/23
</TABLE>
31
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Tennessee Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Care (continued)
$ 4,700,000 The Health and Educational Facilities Board of the Metropolitan 7/08 at 102 N/R $ 3,914,865
Government of Nashville and Davidson County, Tennessee, Revenue
Refunding Bonds, Series 1998 (The Blakford at Green Hills),
5.650%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 4.5%
1,000,000 Hamilton County, Tennessee, General Obligation Bonds, Series 2/05 at 102 Aa2 1,084,850
1995, 6.250%, 2/01/20
4,000,000 Metropolitan Government of Nashville and Davidson County 5/07 at 102 AA 3,544,160
(Tennessee), General Obligation Refunding Bonds, Series 1997,
5.125%, 5/15/25
8,000,000 Metropolitan Government of Nashville and Davidson County 5/06 at 101 AA 7,980,400
(Tennessee), General Obligation Public Improvement Bonds,
Series 1996, 5.875%, 5/15/21
750,000 Shelby County, Tennessee, General Obligation Refunding Bonds, 4/05 at 101 AA+ 754,298
1995 Series A, 5.625%, 4/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 9.8%
1,000,000 The Industrial Development Board of the City of Fayetteville and 5/08 at 100 Aaa 900,010
Lincoln County, Tennessee, Hospital Facility Lease Revenue and
Tax Bonds, Series 1998, 5.300%, 5/01/28
The Health and Educational Facilities Board of the Metropolitan
Government of Nashville and Davidson County (Tennessee), Revenue
Refunding and Improvement Bonds (Meharry Medical College Project),
Series 1996:
1,000,000 6.000%, 12/01/19 12/17 at 100 AAA 1,025,290
4,000,000 5.000%, 12/01/24 6/09 at 100 AAA 3,450,680
5,000,000 The Sports Authority of the Metropolitan Government of Nashville 7/06 at 101 AAA 4,863,750
and Davidson County (Tennessee), Public Improvement Revenue Bonds
(Stadium Project), Series 1996, 5.750%, 7/01/26
6,275,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 5,791,009
Revenue Bonds, Series Y of 1996, 5.500%, 7/01/36
500,000 Puerto Rico Highway and Transportation Authority, Highway No Opt. Call AAA 501,275
Revenue Bonds, Series W, 5.500%, 7/01/15
13,300,000 Puerto Rico Public Buildings Authority, Revenue Refunding Bonds, No Opt. Call A 12,740,602
Series L Guaranteed by the Commonwealth of Puerto Rico, 5.500%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 6.9%
Memphis-Shelby County Airport Authority (Tennessee), Airport Revenue Bonds,
Series 1999D:
4,000,000 6.000%, 3/01/24 (Alternative Minimum Tax) 3/10 at 101 AAA 3,946,760
1,640,000 6.125%, 3/01/25 (Alternative Minimum Tax) 3/10 at 101 AAA 1,641,132
5,545,000 Memphis-Shelby County Airport Authority (Tennessee), Special 9/01 at 103 BBB 5,910,305
Facilities Revenue Bonds, Series 1984 (Federal Express Corporation),
7.875%, 9/01/09
4,100,000 Memphis-Shelby County Airport Authority (Tennessee), Special 9/02 at 102 BBB 4,317,751
Facilities Revenue Refunding Bonds, Series 1992 (Federal Express
Corporation), 6.750%, 9/01/12
Metropolitan Nashville Airport Authority (Tennessee), Airport Improvement
Revenue Refunding Bonds, Series 1991C:
145,000 6.625%, 7/01/07 7/01 at 102 AAA 152,476
4,385,000 6.600%, 7/01/15 7/01 at 102 AAA 4,598,023
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 17.1%
1,000,000 City of Chattanooga, Tennessee, General Obligation Bonds, Series 5/00 at 102 AA*** 1,033,350
1990, Various Purpose, 7.250%, 5/01/12 (Pre-refunded to 5/01/00)
1,930,000 The Health, Educational and Housing Facility Board of the City 9/01 at 102 AAA 2,041,361
of Chattanooga, Tennessee, Hospital Revenue Bonds, Series 1991A
(Memorial Hospital Project), 6.600%, 9/01/12 (Pre-refunded to 9/01/01)
City of Clarksville, Tennessee, Hospital Revenue Refunding and Improvement
Bonds, Series 1993 (Clarksville Memorial Hospital Project):
1,000,000 6.250%, 7/01/08 (Pre-refunded to 7/01/03) 7/03 at 102 Baa1*** 1,068,690
1,775,000 6.250%, 7/01/13 (Pre-refunded to 7/01/03) 7/03 at 102 Baa1*** 1,896,925
1,250,000 6.375%, 7/01/18 (Pre-refunded to 7/01/03) 7/03 at 102 Baa1*** 1,340,963
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,125,000 Eastside Utility District of Hamilton County, Tennessee, Water 11/01 at 102 A*** $ 1,197,990
System Revenue Bonds, Series 1992, 6.750%, 11/01/11
(Pre-refunded to 11/01/01)
1,455,000 Gladeville Utility District of Wilson County, Tennessee, 10/00 at 100 AAA 1,496,133
Waterworks Revenue Bonds, Series 1990, 7.400%, 10/01/10
(Pre-refunded to 10/01/00)
5,000,000 Johnson City, Tennessee, School Sales Tax Revenue and Unlimited 5/06 at 100 AAA 5,523,650
Tax Bonds, Series 1994, 6.700%, 5/01/21 (Pre-refunded to 5/01/06)
3,065,000 The Health, Educational and Housing Facilities Board of the 1/00 at 102 AAA 3,134,116
County of Knox (Tennessee), Hospital Revenue Bonds, Series 1990C
(Fort Sanders Alliance Obligated Group), 7.000%, 1/01/15
(Pre-refunded to 1/01/00)
41,570,000 The Health and Educational Facilities Board of the Metropolitan No Opt. Call Aaa 10,538,826
Government of Nashville and Davidson County (Tennessee), Revenue
Bonds, Series 1988 (Volunteer Healthcare), Subordinate
Lien, 0.000%, 6/01/21
1,165,000 The Health and Educational Facilities Board of the Metropolitan 10/07 at 105 N/R*** 1,471,453
Government of Nashville and Davidson County (Tennessee), Revenue
Bonds, Series 1992A (Mur-Ci Homes Inc. Project), 9.000%, 10/01/22
(Pre-refunded to 10/01/07)
2,500,000 The Public Building Authority of the City of Mt. Juliet, Tennessee, 2/04 at 110 AAA 3,006,200
Revenue Bonds (Utility District Loan Program), Series B, Madison
Suburban Utility District, 7.800%, 2/01/19 (Pre-refunded to 2/01/04)
1,500,000 Northeast Knox, Tennessee, Utility District Water Revenue 1/00 at 102 AAA 1,533,840
Bonds, 7.000%, 1/01/20 (Pre-refunded to 1/01/00)
250,000 Shelby County, Tennessee, General Obligation Refunding Bonds, 4/05 at 101 AA+*** 262,435
1995 Series A, 5.625%, 4/01/14 (Pre-refunded to 4/01/05)
4,000,000 The Health, Educational and Housing Facilities Board of the 2/00 at 102 AAA 4,106,520
County of Sullivan, Tennessee, Hospital Revenue Bonds, Series
1990 (Holston Valley Health Care, Inc.), 7.250%, 2/15/20
(Pre-refunded to 2/15/00)
Tennessee State Local Development Authority, State Loan
Program, Series A:
1,325,000 7.000%, 3/01/12 (Pre-refunded to 3/01/01) 3/01 at 102 AA*** 1,394,006
1,175,000 7.000%, 3/01/21 (Pre-refunded to 3/01/01) 3/01 at 102 AA*** 1,236,194
2,660,000 Tennessee State Local Development Authority, Community Provider 10/02 at 102 A*** 2,877,056
Loan Program, 7.000%, 10/01/21 (Pre-refunded to 10/01/02)
2,300,000 The White House Utility District of Robertson and Sumner 1/02 at 102 AAA 2,434,113
Counties, Tennessee, Water Revenue Refunding and Improvement
Bonds, Series 1992B, 6.375%, 1/01/22 (Pre-refunded to 1/01/02)
Wilson County, Tennessee, Series 1994 Certificates of Participation
(Wilson County Educational Facilities Corporation):
1,500,000 6.125%, 6/30/10 (Pre-refunded to 6/30/04) 6/04 at 102 A2*** 1,611,720
1,500,000 6.250%, 6/30/15 (Pre-refunded to 6/30/04) 6/04 at 102 A2*** 1,619,370
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 7.6%
1,520,000 City of Clarksville, Tennessee, Water, Sewer and Gas Revenue No Opt. Call AAA 588,073
Refunding and Improvement Bonds, Series 1992, 0.000%, 2/01/16
City of Jackson, Tennessee, Electric System Revenue Bonds,
Series E:
315,000 6.300%, 8/01/09 8/00 at 102 A1 325,943
335,000 6.300%, 8/01/10 8/00 at 102 A1 346,638
355,000 6.300%, 8/01/11 8/00 at 102 A1 367,333
380,000 6.300%, 8/01/12 8/00 at 102 A1 393,201
3,000,000 City of Jackson, Tennessee, Gas System Revenue Bonds, Series 4/07 at 100 AAA 2,719,710
1997, 5.000%, 4/15/18
4,475,000 Lawrenceburg, Tennessee, Electric Revenue Bonds, Series 1996, 7/09 at 100 AAA 4,204,665
5.500%, 7/01/26
Metropolitan Government of Nashville and Davidson County, Tennessee,
Electric Revenue Bonds, Series 1996A:
7,800,000 0.000%, 5/15/11 No Opt. Call AAA 4,193,514
8,500,000 0.000%, 5/15/12 No Opt. Call AAA 4,276,775
</TABLE>
33
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Tennessee Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
The Metropolitan Government of Nashville and Davidson County (Tennessee),
Electric System Revenue Bonds, 1998 Series A:
$ 11,000,000 0.000%, 5/15/19 No Opt. Call AAA $ 3,390,970
1,000,000 5.200%, 5/15/23 5/08 at 102 AA 897,990
1,000,000 The Middle Tennessee Utility District of Cannon, Cumberland, Dekalb, 10/02 at 102 AAA 1,067,400
Putnam, Rhea, Rutherford, Smith, Warren, White and Wilson Counties,
Tennessee, Gas System Revenue Bonds, Series 1992, 6.250%, 10/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 3.1%
4,445,000 City of Knoxville, Tennessee, Waste Water System Refunding 4/07 at 101 AA 3,967,740
and Improvement Bonds, Series 1998, 5.125%, 4/01/23
3,000,000 Madison, Tennessee, Suburban Utility District, Water 2/08 at 100 AAA 2,687,490
Revenue Refunding Bonds, Series 1995, 5.000%, 2/01/19
1,000,000 Milcrofton Utility District of Williamson County, 2/06 at 102 N/R 947,740
Tennessee, Waterworks Revenue Refunding Bonds,
Series 1996 (Junior Lien), 6.000%, 2/01/24
1,500,000 Wilson County Water and Wastewater Authority, Waterworks 3/08 at 102 Baa1 1,509,539
Revenue Refunding and Improvement Bonds, Series 1993, 6.000%, 3/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
$352,650,000 Total Investments - (cost $302,228,594) - 100.4% 299,082,353
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.4)% (1,145,107)
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $297,937,246
===================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
34
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets (Unaudited)
November 30, 1999
Georgia Louisiana
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $147,532,155 $125,676,105
Temporary investments in short-term municipal securities, at amortized cost, which approximates
market value (note 1) -- 1,000,000
Cash -- --
Receivables:
Interest 3,120,452 2,265,402
Investments sold 2,837,100 2,100,000
Shares sold 117,063 54,836
Other assets 181,139 117,432
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 153,787,909 131,213,775
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 4,770,606 520,800
Payables:
Investments purchased -- --
Shares redeemed 155,324 1,110,868
Accrued expenses:
Management fees (note 6) 67,299 58,493
12b-1 distribution and service fees (notes 1 and 6) 41,800 42,542
Other 21,269 17,347
Dividends payable 247,242 187,964
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,303,540 1,938,014
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $148,484,369 $129,275,761
====================================================================================================================================
Class A Shares (note 1)
Net assets $114,140,062 $ 86,414,606
Shares outstanding 11,091,948 8,227,207
Net asset value and redemption price per share $ 10.29 $ 10.50
Offering price per share (net asset value per share plus maximum sales charge of 4.20%
of offering price) $ 10.74 $ 10.96
====================================================================================================================================
Class B Shares (note 1)
Net assets $ 12,497,353 $ 19,524,083
Shares outstanding 1,212,888 1,859,332
Net asset value, offering and redemption price per share $ 10.30 $ 10.50
====================================================================================================================================
Class C Shares (note 1)
Net assets $ 21,411,313 $ 21,099,906
Shares outstanding 2,084,910 2,011,395
Net asset value, offering and redemption price per share $ 10.27 $ 10.49
====================================================================================================================================
Class R Shares (note 1)
Net assets $ 435,641 $ 2,237,166
Shares outstanding 42,460 212,957
Net asset value, offering and redemption price per share $ 10.26 $ 10.51
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
Statement of Net Assets (Unaudited) (continued)
November 30, 1999
<TABLE>
<CAPTION>
North Carolina Tennessee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $198,260,694 $299,082,353
Temporary investments in short-term municipal securities, at amortized cost, which approximates
market value (note 1) -- --
Cash 5,195,860 --
Receivables:
Interest 3,316,420 5,041,849
Investments sold 81,554 --
Shares sold 17,498 1,920
Other assets 218,444 300,034
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 207,090,470 304,426,156
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 672,049
Payables:
Investments purchased 9,295,632 4,470,709
Shares redeemed 549,413 558,418
Accrued expenses:
Management fees (note 6) 88,346 133,047
12b-1 distribution and service fees (notes 1 and 6) 47,462 68,963
Other 103,170 15,596
Dividends payable 407,581 570,128
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 10,491,604 6,488,910
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $196,598,866 $297,937,246
====================================================================================================================================
Class A Shares (note 1)
Net assets $165,774,206 $258,403,241
Shares outstanding 17,181,242 24,440,527
Net asset value and redemption price per share $ 9.65 $ 10.57
Offering price per share (net asset value per share plus maximum sales charge of 4.20% of
offering price) $ 10.07 $ 11.03
====================================================================================================================================
Class B Shares (note 1)
Net assets $ 11,762,330 $ 12,969,159
Shares outstanding 1,217,486 1,225,592
Net asset value, offering and redemption price per share $ 9.66 $ 10.58
====================================================================================================================================
Class C Shares (note 1)
Net assets $ 17,720,488 $ 26,060,246
Shares outstanding 1,838,988 2,464,373
Net asset value, offering and redemption price per share $ 9.64 $ 10.57
====================================================================================================================================
Class R Shares (note 1)
Net assets $ 1,341,842 $ 504,600
Shares outstanding 139,029 47,775
Net asset value, offering and redemption price per share $ 9.65 $ 10.56
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended November 30, 1999
<TABLE>
<CAPTION>
Georgia Louisiana North Carolina Tennessee
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (note 1) $ 4,653,343 $ 4,027,607 $ 6,018,333 $ 9,266,011
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 427,717 373,434 558,832 837,329
12b-1 service fees - Class A (notes 1 and 6) 120,980 92,422 174,359 269,523
12b-1 distribution and service fees - Class B (notes 1 and 6) 57,978 94,237 52,840 60,806
12b-1 distribution and service fees - Class C (notes 1 and 6) 85,002 80,418 68,191 102,025
Shareholders' servicing agent fees and expenses 33,495 25,187 59,298 73,711
Custodian's fees and expenses 33,570 32,856 32,159 60,419
Trustees' fees and expenses (note 6) 1,834 2,032 2,218 4,126
Professional fees 1,011 960 6,167 4,006
Shareholders' reports - printing and mailing expenses 20,451 10,525 22,966 17,978
Federal and state registration fees 6,057 4,831 3,138 969
Other expenses 3,138 3,322 7,998 6,924
- ------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense
reimbursement 791,233 720,224 988,166 1,437,816
Custodian fee credit (note 1) -- (11,736) (2,624) (17,769)
Expense reimbursement (note 6) (6,667) (16,608) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net expenses 784,566 691,880 985,542 1,420,047
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,868,777 3,335,727 5,032,791 7,845,964
- ------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (1,154,820) (1,176,134) (1,240,611) (434,215)
Net change in unrealized appreciation or depreciation
of investments (9,798,525) (9,804,374) (13,906,774) (20,511,333)
- ------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (10,953,345) (10,980,508) (15,147,385) (20,945,548)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (7,084,568) $ (7,644,781) $(10,114,594) $(13,099,584)
==============================================================================================================================
See accompanying notes to financial statements.
</TABLE>
37
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Georgia Louisiana
------------------------------- -------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/99 5/31/99 11/30/99 5/31/99
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 3,868,777 $ 7,291,338 $ 3,335,727 $ 5,932,274
Net realized gain (loss) from investment transactions (notes 1
and 4) (1,154,820) 1,743,273 (1,176,134) 542,532
Net change in unrealized appreciation or depreciation of
investments (9,798,525) (4,263,258) (9,804,374) (2,258,787)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (7,084,568) 4,771,353 (7,644,781) 4,216,019
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (3,004,766) (6,036,625) (2,351,974) (4,530,236)
Class B (253,743) (302,465) (426,974) (554,071)
Class C (499,507) (938,110) (487,210) (749,521)
Class R (9,912) (13,736) (62,077) (98,115)
From accumulated net realized gains from investment transactions:
Class A -- -- -- (327,196)
Class B -- -- -- (46,841)
Class C -- -- -- (60,212)
Class R -- -- -- (8,993)
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,767,928) (7,290,936) (3,328,235) (6,375,185)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 9,279,193 39,029,909 14,287,808 42,859,091
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 1,470,048 2,897,417 1,131,131 2,607,781
- ----------------------------------------------------------------------------------------------------------------------------------
10,749,241 41,927,326 15,418,939 45,466,872
Cost of shares redeemed (16,264,039) (17,634,491) (17,019,165) (13,310,878)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (5,514,798) 24,292,835 (1,600,226) 32,155,994
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (16,367,294) 21,773,252 (12,573,242) 29,996,828
Net assets at the beginning of period 164,851,663 143,078,411 141,849,003 111,852,175
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $148,484,369 $164,851,663 $129,275,761 $141,849,003
==================================================================================================================================
Balance of undistributed net investment income at the end of
period $ 102,339 $ 1,490 $ 9,111 $ 1,619
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
North Carolina Tennessee
--------------------------------- -------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/99 5/31/99 11/30/99 5/31/99
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 5,032,791 $ 9,829,859 $ 7,845,964 $ 15,244,309
Net realized gain (loss) from investment transactions (notes
1 and 4) (1,240,611) 104,431 (434,215) 557,919
Net change in unrealized appreciation or depreciation of
investments (13,906,774) (3,181,988) (20,511,333) (5,201,506)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (10,114,594) 6,752,302 (13,099,584) 10,600,722
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (4,300,651) (8,995,903) (6,819,271) (13,826,854)
Class B (229,679) (283,644) (272,471) (398,784)
Class C (394,288) (514,487) (605,244) (1,039,949)
Class R (32,809) (60,402) (13,388) (27,716)
From accumulated net realized gains from investment
transactions:
Class A -- (1,598,066) -- --
Class B -- (60,411) -- --
Class C -- (99,492) -- --
Class R -- (11,127) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (4,957,427) (11,623,532) (7,710,374) (15,293,303)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 13,441,235 34,546,447 18,991,658 47,588,847
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 2,453,474 5,975,298 3,355,307 6,661,847
- ----------------------------------------------------------------------------------------------------------------------------------
15,894,709 40,521,745 22,346,965 54,250,694
Cost of shares redeemed (17,021,351) (21,940,534) (30,607,024) (27,763,938)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (1,126,642) 18,581,211 (8,260,059) 26,486,756
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (16,198,663) 13,709,981 (29,070,017) 21,794,175
Net assets at the beginning of period 212,797,529 199,087,548 327,007,263 305,213,088
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $196,598,866 $212,797,529 $297,937,246 $327,007,263
==================================================================================================================================
Balance of undistributed net investment income at the end of
period $ 80,346 $ 4,982 $ 160,474 $ 24,884
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust III (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Georgia Municipal Bond Fund ("Georgia"), the
Nuveen Flagship Louisiana Municipal Bond Fund ("Louisiana"), the Nuveen Flagship
North Carolina Municipal Bond Fund ("North Carolina"), and the Nuveen Flagship
Tennessee Municipal Bond Fund ("Tennessee") (collectively, the "Funds"). The
Trust was organized as a Massachusetts business trust on July 1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
November 30, 1999, North Carolina and Tennessee had outstanding when-issued
purchase commitments of $9,295,632 and $4,470,709, respectively. There were no
such outstanding purchase commitments in either of the other Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to shareholders of the Funds. Net realized
capital gain and market discount distributions are subject to federal taxation.
40
<PAGE>
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the six months ended November 30, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Georgia
-----------------------------------------------------
Six Months Ended Year Ended
11/30/99 5/31/99
------------------------- -------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 371,246 $ 3,944,935 1,719,183 $ 19,217,921
Class B 239,212 2,516,712 806,630 9,032,174
Class C 258,113 2,728,497 953,740 10,667,189
Class R 8,524 89,049 10,082 112,625
Shares issued to shareholders due to reinvestment of distributions:
Class A 113,902 1,209,038 216,299 2,426,448
Class B 8,713 92,419 11,396 127,876
Class C 15,160 160,553 29,544 330,616
Class R 762 8,038 1,116 12,477
- ----------------------------------------------------------------------------------------------------------------------------
1,015,632 10,749,241 3,747,990 41,927,326
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,021,299) (10,735,056) (1,084,049) (12,116,347)
Class B (122,048) (1,279,081) (45,215) (503,665)
Class C (403,271) (4,249,902) (449,451) (5,014,371)
Class R -- -- (10) (108)
- ----------------------------------------------------------------------------------------------------------------------------
(1,546,618) (16,264,039) (1,578,725) (17,634,491)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (530,986) $ (5,514,798) 2,169,265 $ 24,292,835
============================================================================================================================
</TABLE>
41
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
<TABLE>
<CAPTION>
Louisiana
-----------------------------------------------------
Six Months Ended Year Ended
11/30/99 5/31/99
------------------------- -------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 604,625 $ 6,528,408 1,716,601 $ 19,817,323
Class B 377,942 4,145,673 914,530 10,557,807
Class C 329,127 3,580,865 865,510 9,983,365
Class R 2,909 32,862 215,752 2,500,596
Shares issued to shareholders due to reinvestment of distributions:
Class A 77,946 851,502 175,520 2,033,853
Class B 12,023 130,827 24,928 288,244
Class C 7,906 86,116 16,348 189,229
Class R 5,738 62,686 8,320 96,455
- ----------------------------------------------------------------------------------------------------------------------------
1,418,216 15,418,939 3,937,509 45,466,872
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,172,707) (12,653,070) (893,149) (10,322,469)
Class B (189,855) (2,038,469) (59,695) (688,490)
Class C (204,722) (2,207,626) (188,463) (2,173,160)
Class R (11,070) (120,000) (11,114) (126,759)
- ----------------------------------------------------------------------------------------------------------------------------
(1,578,354) (17,019,165) (1,152,421) (13,310,878)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (160,138) $ (1,600,226) 2,785,088 $ 32,155,994
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
North Carolina
-----------------------------------------------------
Six Months Ended Year Ended
11/30/99 5/31/99
------------------------- -------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 757,171 $ 7,516,851 1,497,738 $ 15,852,866
Class B 249,500 2,481,824 765,417 8,109,386
Class C 318,780 3,211,167 945,187 9,986,996
Class R 23,133 231,393 56,314 597,199
Shares issued to shareholders due to reinvestment of distributions:
Class A 210,608 2,102,429 510,481 5,422,357
Class B 11,455 114,443 16,356 173,663
Class C 21,013 209,394 30,647 324,719
Class R 2,728 27,208 5,136 54,559
- ----------------------------------------------------------------------------------------------------------------------------
1,594,388 15,894,709 3,827,276 40,521,745
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,454,288) (14,354,807) (1,889,845) (19,995,567)
Class B (64,658) (646,083) (100,335) (1,061,551)
Class C (189,952) (1,889,566) (68,759) (724,414)
Class R (13,172) (130,895) (14,938) (159,002)
- ----------------------------------------------------------------------------------------------------------------------------
(1,722,070) (17,021,351) (2,073,877) (21,940,534)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (127,682) $ (1,126,642) 1,753,399 $ 18,581,211
============================================================================================================================
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Tennessee
-----------------------------------------------------
Six Months Ended Year Ended
11/30/99 5/31/99
------------------------ -------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,269,408 $ 13,747,023 2,608,976 $ 29,959,161
Class B 238,553 2,593,202 645,177 7,415,547
Class C 243,042 2,649,658 887,754 10,185,551
Class R 161 1,775 2,492 28,588
Shares issued to shareholders due to reinvestment of distributions:
Class A 276,194 3,004,984 525,327 6,045,014
Class B 12,048 131,060 17,555 202,163
Class C 19,216 209,065 34,095 392,181
Class R 937 10,198 1,957 22,489
- ----------------------------------------------------------------------------------------------------------------------------
2,059,559 22,346,965 4,723,333 54,250,694
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,416,205) (26,163,194) (2,109,544) (24,227,337)
Class B (122,945) (1,322,502) (68,504) (782,931)
Class C (288,565) (3,119,460) (236,242) (2,705,131)
Class R (173) (1,868) (4,257) (48,539)
- ----------------------------------------------------------------------------------------------------------------------------
(2,827,888) (30,607,024) (2,418,547) (27,763,938)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (768,329) $ (8,260,059) 2,304,786 $ 26,486,756
============================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on December 20, 1999, to shareholders of record on
Decemebr 9, 1999, as follows:
<TABLE>
<CAPTION>
North
Georgia Louisiana Carolina Tennessee
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $.0440 $.0460 $.0405 $.0455
Class B .0375 .0390 .0345 .0385
Class C .0390 .0410 .0360 .0405
Class R .0455 .0475 .0420 .0470
================================================================================
</TABLE>
The following Funds also declared taxable distributions, which include capital
gains and/or market discount, which were paid on December 7, 1999, to
shareholders of record on December 2, 1999, as follows:
<TABLE>
<CAPTION>
Georgia Louisiana
- --------------------------------------------------------------------------------
<S> <C> <C>
Taxable distributions per share: $.0394 $.0034
================================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal secruities for the six months ended November
30, 1999, were as follows:
<TABLE>
<CAPTION>
North
Georgia Louisiana Carolina Tennessee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Long-term municipal securities $22,166,788 $ 26,120,998 $ 41,202,067 $ 30,723,488
Short-term municipal securities -- 7,000,000 9,550,000 --
Sales:
Long-term municipal securities 25,353,765 30,393,132 38,765,190 37,546,403
Short-term municipal securities -- 6,000,000 9,550,000 --
================================================================================================================
</TABLE>
At November 30, 1999, the identified cost of investments owned for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
North
Georgia Louisiana Carolina Tennessee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$149,337,848 $129,428,399 $203,017,342 $302,228,594
================================================================================================================
</TABLE>
At May 31, 1999, the Funds' last fiscal year end, Tennessee had an unused
capital loss carryforward of $2,228,819 available for federal income tax
purposes to be applied against future capital gains, if any. If not applied, the
carryforward will expire in the year 2003.
43
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at November 30, 1999, were as follows:
<TABLE>
<CAPTION>
Georgia Louisiana North Carolina Tennessee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $ 4,246,550 $ 2,798,322 $ 2,808,636 $ 7,310,871
depreciation (6,052,243) (5,550,616) (7,565,284) (10,457,112)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $(1,805,693) $(2,752,294) $(4,756,648) $ (3,146,241)
=======================================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
<S> <C>
- --------------------------------------------------------------------------------
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1999, John Nuveen & Co. Incorporated
(the "Distributor"), a wholly owned subsidiary of The John Nuveen Company,
collected sales charges on purchases of Class A Shares, the majority of which
were paid out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Georgia Louisiana North Carolina Tennessee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges collected $52,282 $74,848 $79,498 $144,876
Paid to authorized dealers 44,762 54,374 79,498 144,876
===============================================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the six months ended November 30, 1999, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Georgia Louisiana North Carolina Tennessee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commission advances $111,841 $205,755 $168,118 $193,233
===============================================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees collected on Class B Shares, and all 12b-1 service and
distribution fees collected on Class C Shares during the first year following a
purchase are retained by the Distributor. During the six months ended November
30, 1999, the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Georgia Louisiana North Carolina Tennessee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 fees retained $79,371 $112,123 $81,203 $79,388
===============================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
six months ended November 30, 1999, as follows:
<TABLE>
<CAPTION>
Georgia Louisiana North Carolina Tennessee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CDSC retained $26,492 $90,267 $21,543 $46,529
===============================================================================================
</TABLE>
7. Composition of Net Assets
At November 30, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Georgia Louisiana North Carolina Tennessee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $150,775,094 $133,153,648 $202,645,754 $303,586,261
Balance of undistributed net investment income 102,339 9,111 80,346 160,474
Accumulated net realized gain (loss) from
investment transactions (587,371) (1,135,909) (1,370,586) (2,663,248)
Net unrealized appreciation (depreciation) of investments (1,805,693) (2,751,089) (4,756,648) (3,146,241)
- -------------------------------------------------------------------------------------------------------------------------
Net assets $148,484,369 $129,275,761 $196,598,866 $297,937,246
=========================================================================================================================
</TABLE>
44
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------- ------------------
Net
GEORGIA** Realized/
Unrealized
Beginning Net invest- Net Ending
Net Invest- ment invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return(a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
2000 (e) $ 11.02 $.27 $(.74) $(.47) $(.26) $ -- $ (.26) $10.29 (4.27)%
1999 11.19 .54 (.17) .37 (.54) -- (.54) 11.02 3.34
1998 10.57 .56 .62 1.18 (.56) -- (.56) 11.19 11.37
1997 10.20 .57 .37 .94 (.57) -- (.57) 10.57 9.39
1996 10.46 .57 (.25) .32 (.58) -- (.58) 10.20 3.05
1995 10.23 .58 .23 .81 (.58) -- (.58) 10.46 8.31
Class B (2/97)
2000 (e) 11.03 .23 (.74) (.51) (.22) -- (.22) 10.30 (4.64)
1999 11.20 .46 (.17) .29 (.46) -- (.46) 11.03 2.57
1998 10.57 .48 .63 1.11 (.48) -- (.48) 11.20 10.66
1997 (d) 10.66 .14 (.11) .03 (.12) -- (.12) 10.57 .31
Class C (1/94)
2000 (e) 11.00 .24 (.74) (.50) (.23) -- (.23) 10.27 (4.55)
1999 11.17 .48 (.17) .31 (.48) -- (.48) 11.00 2.80
1998 10.55 .50 .62 1.12 (.50) -- (.50) 11.17 10.79
1997 10.18 .51 .37 .88 (.51) -- (.51) 10.55 8.80
1996 10.44 .51 (.25) .26 (.52) -- (.52) 10.18 2.48
1995 10.21 .52 .23 .75 (.52) -- (.52) 10.44 7.72
Class R (2/97)
2000 (e) 10.99 .28 (.74) (.46) (.27) -- (.27) 10.26 (4.20)
1999 11.15 .56 (.15) .41 (.57) -- (.57) 10.99 3.67
1998 10.57 .58 .59 1.17 (.59) -- (.59) 11.15 11.23
1997 (d) 10.65 .18 (.06) .12 (.20) -- (.20) 10.57 1.11
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
--------------------- ------------------- -------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
2000 (e) $114,140 .87%* 5.07%* .86%* 5.07%* .86%* 5.07%* 14%
1999 128,138 .88 4.69 .74 4.83 .74 4.83 32
1998 120,545 .87 4.88 .66 5.09 .66 5.09 25
1997 111,518 1.02 5.20 .78 5.44 .78 5.44 39
1996 107,862 1.08 5.18 .80 5.46 .80 5.46 59
1995 113,354 1.09 5.53 .83 5.79 .83 5.79 40
Class B (2/97)
2000 (e) 12,497 1.62* 4.33* 1.61* 4.34* 1.61* 4.34* 14
1999 11,991 1.64 3.94 1.50 4.08 1.50 4.08 32
1998 3,518 1.62 4.08 1.38 4.32 1.38 4.32 25
1997 (d) 113 1.63* 4.49* 1.32* 4.80* 1.32* 4.80* 39
Class C (1/94)
2000 (e) 21,411 1.42* 4.52* 1.41* 4.52* 1.41* 4.52* 14
1999 24,358 1.44 4.13 1.29 4.28 1.29 4.28 32
1998 18,770 1.42 4.33 1.21 4.54 1.21 4.54 25
1997 11,803 1.56 4.63 1.32 4.87 1.32 4.87 39
1996 9,433 1.63 4.61 1.34 4.90 1.34 4.90 59
1995 6,973 1.64 4.92 1.38 5.18 1.38 5.18 40
Class R (2/97)
2000 (e) 436 .67* 5.29* .67* 5.30* .67* 5.30* 14
1999 364 .68 4.89 .54 5.03 .54 5.03 32
1998 245 .67 5.04 .45 5.26 .45 5.26 25
1997 (d) 22 .68* 5.41* .38* 5.71* .38* 5.71* 39
=======================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Georgia.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
45
<PAGE>
Financial Highlights (Unaudited) (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- ---------------------------
LOUISIANA**
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return (a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/89)
2000 (e) $11.38 $.28 $(.88) $(.60) $(.28) $ -- $(.28) $10.50 (5.26)%
1999 11.55 .57 (.13) .44 (.57) (.04) (.61) 11.38 3.73
1998 11.10 .59 .49 1.08 (.59) (.04) (.63) 11.55 9.88
1997 10.71 .59 .39 .98 (.59) -- (.59) 11.10 9.37
1996 10.80 .59 (.08) .51 (.60) -- (.60) 10.71 4.77
1995 10.48 .60 .32 .92 (.60) -- (.60) 10.80 9.20
Class B (2/97)
2000 (e) 11.37 .24 (.88) (.64) (.23) -- (.23) 10.50 (5.63)
1999 11.55 .48 (.14) .34 (.48) (.04) (.52) 11.37 2.98
1998 11.09 .50 .50 1.00 (.50) (.04) (.54) 11.55 9.18
1997 (d) 11.10 .16 -- .16 (.17) -- (.17) 11.09 1.44
Class C (2/94)
2000 (e) 11.36 .25 (.87) (.62) (.25) -- (.25) 10.49 (5.53)
1999 11.54 .50 (.13) .37 (.51) (.04) (.55) 11.36 3.20
1998 11.09 .52 .50 1.02 (.53) (.04) (.57) 11.54 9.32
1997 10.70 .53 .39 .92 (.53) -- (.53) 11.09 8.78
1996 10.80 .53 (.09) .44 (.54) -- (.54) 10.70 4.12
1995 10.48 .54 .32 .86 (.54) -- (.54) 10.80 8.59
Class R (2/97)
2000 (e) 11.38 .29 (.87) (.58) (.29) -- (.29) 10.51 (5.16)
1999 11.55 .59 (.13) .46 (.59) (.04) (.63) 11.38 4.03
1998 11.09 .61 .50 1.11 (.61) (.04) (.65) 11.55 10.21
1997 (d) 11.17 .15 (.08) .07 (.15) -- (.15) 11.09 .67
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
--------------------- ------------------- -------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/89)
2000 (e) $86,415 .86%* 5.04%* .84%* 5.06%* .82%* 5.08%* 19%
1999 99,176 .88 4.76 .75 4.89 .75 4.89 11
1998 89,143 .88 5.00 .75 5.13 .75 5.13 15
1997 76,030 1.03 5.14 .79 5.38 .79 5.38 25
1996 72,005 1.09 5.17 .80 5.46 .80 5.46 26
1995 68,145 1.18 5.45 .83 5.80 .83 5.80 44
Class B (2/97)
2000 (e) 19,524 1.61* 4.30* 1.59* 4.32* 1.57* 4.34* 19
1999 18,870 1.64 4.00 1.49 4.15 1.49 4.15 11
1998 8,999 1.62 4.21 1.45 4.38 1.45 4.38 15
1997 (d) 917 1.65* 4.50* 1.46* 4.69* 1.46* 4.69* 25
Class C (2/94)
2000 (e) 21,100 1.41* 4.50* 1.39* 4.52* 1.37* 4.54* 19
1999 21,352 1.43 4.20 1.29 4.34 1.29 4.34 11
1998 13,682 1.42 4.45 1.29 4.58 1.29 4.58 15
1997 7,645 1.57 4.59 1.33 4.83 1.33 4.83 25
1996 5,658 1.64 4.58 1.35 4.87 1.35 4.87 26
1995 3,220 1.73 4.85 1.37 5.21 1.37 5.21 44
Class R (2/97)
2000 (e) 2,237 .66* 5.24* .64* 5.26* .62* 5.28* 19
1999 2,451 .68 4.97 .55 5.10 .55 5.10 11
1998 28 .67 5.17 .52 5.32 .52 5.32 15
1997 (d) -- .08* 5.27* .04* 5.31* .04* 5.31* 25
=====================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Louisiana.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
46
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------- --------------------------
NORTH CAROLINA**
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return(a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
2000 (e) $10.38 $.25 $(.73) $(.48) $(.25) $ -- $(.25) $ 9.65 (4.70)%
1999 10.62 .51 (.15) .36 (.51) (.09) (.60) 10.38 3.43
1998 10.28 .53 .34 .87 (.53) -- (.53) 10.62 8.69
1997 10.05 .54 .23 .77 (.54) -- (.54) 10.28 7.79
1996 10.23 .55 (.18) .37 (.55) -- (.55) 10.05 3.67
1995 10.08 .57 .15 .72 (.57) -- (.57) 10.23 7.45
Class B (2/97)
2000 (e) 10.39 .21 (.73) (.52) (.21) -- (.21) 9.66 (5.07)
1999 10.62 .44 (.15) .29 (.43) (.09) (.52) 10.39 2.73
1998 10.28 .45 .35 .80 (.46) -- (.46) 10.62 7.89
1997 (d) 10.33 .12 (.06) .06 (.11) -- (.11) 10.28 .64
Class C (10/93)
2000 (e) 10.36 .22 (.72) (.50) (.22) -- (.22) 9.64 (4.90)
1999 10.60 .46 (.16) .30 (.45) (.09) (.54) 10.36 2.85
1998 10.26 .47 .34 .81 (.47) -- (.47) 10.60 8.09
1997 10.03 .48 .23 .71 (.48) -- (.48) 10.26 7.20
1996 10.22 .49 (.18) .31 (.50) -- (.50) 10.03 3.01
1995 10.06 .51 .16 .67 (.51) -- (.51) 10.22 6.97
Class R (2/97)
2000 (e) 10.38 .26 (.74) (.48) (.25) -- (.25) 9.65 (4.62)
1999 10.62 .53 (.15) .38 (.53) (.09) (.62) 10.38 3.61
1998 10.28 .55 .34 .89 (.55) -- (.55) 10.62 8.88
1997 (d) 10.27 .18 .01 .19 (.18) -- (.18) 10.28 1.92
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ -------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
May 31, (000) Assets Assets Assets Assets Assets Assets Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
2000 (e) $165,774 .87%* 4.98%* .87%* 4.98%* .87%* 4.98%* 19%
1999 183,370 .88 4.66 .74 4.80 .74 4.80 11
1998 186,340 .86 5.06 .86 5.06 .86 5.06 29
1997 181,595 1.00 5.24 .93 5.31 .93 5.31 23
1996 185,016 1.03 5.19 .90 5.32 .90 5.32 54
1995 191,850 1.06 5.58 .91 5.73 .91 5.73 35
Class B (2/97)
2000 (e) 11,762 1.62* 4.24* 1.62* 4.24* 1.62* 4.24* 19
1999 10,609 1.64 3.91 1.44 4.11 1.44 4.11 11
1998 3,609 1.61 4.23 1.61 4.23 1.61 4.23 29
1997 (d) 271 1.62* 4.60* 1.62* 4.60* 1.62* 4.60* 23
Class C (10/93)
2000 (e) 17,720 1.42* 4.44* 1.42* 4.44* 1.42* 4.44* 19
1999 17,507 1.44 4.11 1.24 4.31 1.24 4.31 11
1998 8,291 1.41 4.50 1.41 4.50 1.41 4.50 29
1997 7,065 1.54 4.70 1.48 4.76 1.48 4.76 23
1996 6,589 1.58 4.64 1.45 4.77 1.45 4.77 54
1995 6,049 1.61 4.98 1.46 5.13 1.46 5.13 35
Class R (2/97)
2000 (e) 1,342 .67* 5.18* .67* 5.18* .67* 5.18* 19
1999 1,312 .68 4.86 .53 5.01 .53 5.01 11
1998 848 .66 5.24 .66 5.24 .66 5.24 29
1997 (d) 405 .66* 5.57* .66* 5.57* .66* 5.57* 23
==================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship North Carolina.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
47
<PAGE>
Financial Highlights (Unaudited) (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------- ---------------------------
TENNESSEE**
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return (a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (11/87)
2000 (e) $11.30 $.28 $(.74) $(.46) $(.27) $ -- $(.27) $10.57 (4.06)%
1999 11.46 .55 (.15) .40 (.56) -- (.56) 11.30 3.47
1998 11.06 .58 .40 .98 (.58) -- (.58) 11.46 9.01
1997 10.83 .59 .23 .82 (.59) -- (.59) 11.06 7.71
1996 11.01 .59 (.18) .41 (.59) -- (.59) 10.83 3.78
1995 10.78 .60 .23 .83 (.60) -- (.60) 11.01 8.04
Class B (2/97)
2000 (e) 11.30 .24 (.73) (.49) (.23) -- (.23) 10.58 (4.35)
1999 11.46 .47 (.16) .31 (.47) -- (.47) 11.30 2.72
1998 11.06 .49 .40 .89 (.49) -- (.49) 11.46 8.21
1997 (d) 11.14 .14 (.09) .05 (.13) -- (.13) 11.06 .42
Class C (10/93)
2000 (e) 11.30 .25 (.74) (.49) (.24) -- (.24) 10.57 (4.35)
1999 11.45 .49 (.15) .34 (.49) -- (.49) 11.30 2.97
1998 11.05 .52 .39 .91 (.51) -- (.51) 11.45 8.39
1997 10.82 .53 .23 .76 (.53) -- (.53) 11.05 7.12
1996 11.00 .53 (.18) .35 (.53) -- (.53) 10.82 3.22
1995 10.78 .54 .22 .76 (.54) -- (.54) 11.00 7.35
Class R (2/97)
2000 (e) 11.28 .29 (.73) (.44) (.28) -- (.28) 10.56 (3.90)
1999 11.44 .57 (.15) .42 (.58) -- (.58) 11.28 3.68
1998 11.04 .60 .40 1.00 (.60) -- (.60) 11.44 9.20
1997 (d) 11.09 .20 (.05) .15 (.20) -- (.20) 11.04 1.40
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (11/87)
2000 (e) $258,403 .85%* 5.11%* .85%* 5.11%* .83%* 5.12%* 10%
1999 285,935 .84 4.81 .84 4.81 .84 4.81 16
1998 278,232 .84 5.09 .82 5.11 .82 5.11 15
1997 257,475 .97 5.23 .85 5.35 .85 5.35 23
1996 250,886 1.01 5.17 .88 5.30 .88 5.30 38
1995 241,778 1.07 5.46 .89 5.64 .89 5.64 23
Class B (2/97)
2000 (e) 12,969 1.59* 4.37* 1.59* 4.37* 1.58* 4.38* 10
1999 12,410 1.59 4.08 1.59 4.08 1.59 4.08 16
1998 5,775 1.59 4.30 1.58 4.31 1.58 4.31 15
1997 (d) 537 1.60* 4.49* 1.37* 4.72* 1.37* 4.72* 23
Class C (10/93)
2000 (e) 26,060 1.39* 4.57* 1.39* 4.57* 1.38* 4.58* 10
1999 28,134 1.39 4.27 1.39 4.27 1.39 4.27 16
1998 20,673 1.39 4.53 1.37 4.55 1.37 4.55 15
1997 15,049 1.53 4.67 1.40 4.80 1.40 4.80 23
1996 15,483 1.56 4.62 1.43 4.75 1.43 4.75 38
1995 12,494 1.62 4.90 1.44 5.08 1.44 5.08 23
Class R (2/97)
2000 (e) 505 .65* 5.33* .65* 5.33* .64* 5.34* 10
1999 529 .64 5.01 .64 5.01 .64 5.01 16
1998 534 .64 5.27 .62 5.29 .62 5.29 15
1997 (d) 248 .66* 5.55* .46* 5.75* .46* 5.75* 23
=====================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Tennessee.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
48
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
49
<PAGE>
Serving
Investors for Generations
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
